UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C.  20549





FORM
10-Q


(Mark
One)


/X/
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
              
              FOR
      THE QUARTERLY PERIOD ENDED MARCH 31, 2009
              OR/  /
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
              FOR
      THE TRANSITION PERIOD FROM _______________ TO
      _________________


Commission
file number 1-14369





AMERICAN
COMMUNITY PROPERTIES TRUST


(Exact
name of registrant as specified in its charter)





MARYLAND
              (State
      or other jurisdiction of incorporation or organization)
            52-2058165
              (I.R.S.
      Employer Identification No.)


222
Smallwood Village Center


St.
Charles, Maryland  20602


(Address
of principal executive offices)(Zip Code)


(301)
843-8600


(Registrant's
telephone number, including area code)





Securities
registered pursuant to Section 12(b) of the Act:





TITLE
      OF EACH CLASS
              Common
      Shares, $.01 par value
            NAME
      OF EACH EXCHANGE ON WHICH REGISTERED
              NYSE
      Amex





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.


Yes
/x/                      No
/ /





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files).        Yes /x/ No /
/





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.


Large
accelerated filer  / /  Accelerated filer  /
/   Non-accelerated filer  /
/    Smaller Reporting Company /x/





Indicate
by check mark whether the Registrant is a shell company (as defined in Rule
12b-2 of the Securities Exchange Act of
1934).    Yes  /
/    No  /x/





As of May
1, 2009, there were 5,229,954 common shares outstanding.


-1-


AMERICAN
COMMUNITY PROPERTIES TRUST


FORM
10-Q


MARCH
31, 2009


TABLE OF CONTENTS











PART I
            FINANCIAL INFORMATIONItem 1.
            Consolidated Financial StatementsConsolidated Statements of Operations for the
      Three Months Ended March 31, 2009 (Unaudited) and March 31, 2008
      (Unaudited)
            3Consolidated Balance Sheets as of March 31,
      2009 (Unaudited) and December 31, 2008
            4Consolidated Statement of Changes in
      Shareholders' Equity for the Three Months Ended March 31, 2009
      (Unaudited)
            5Consolidated Statements of Cash Flows for the
      Three Months Ended March 31, 2009 (Unaudited) and March 31, 2008
      (Unaudited)
            6Notes to Consolidated Financial Statements
      (Unaudited)
            7Item 2.
            Management's Discussion and Analysis of Financial Condition
      and Results of Operations for the Three Months Ended March 31, 2009 and
      2008
            27Item 4T.
            Controls and Procedures
            39PART II
            OTHER INFORMATIONItem 1.
            Legal Proceedings
            40Item 1A.
            Risk Factors
            40Item 2
            Unregistered Sales of Equity Securities and Use
      of Proceeds
            40Item 3.
            Defaults Upon Senior
Securities
            40Item 4.
            Submission of Matters to a Vote of
      Security Holders
            40Item 5.
            Other Information
            40Item 6.
            Exhibits
            40Signatures
            41





-2-
 Table of Contents





AMERICAN COMMUNITY PROPERTIES TRUSTCONSOLIDATED STATEMENTS OF
      OPERATIONSFOR
      THE THREE MONTHS ENDED MARCH 31,(In
      thousands, except per share amounts)(Unaudited)2009
                                                                                                
                                                                                                
                                                                                                2008RevenuesRental
      property revenues
                                                                                                
                                                                                                $
                                                                                                8,494
                                                                                                
                                                                                                
                                                                                                $
                                                                                                8,401Community
      development-land sales
                                                                                                
                                                                                                
                                                                                                531
                                                                                                
                                                                                                
                                                                                                
                                                                                                1,046Homebuilding-home
      sales
                                                                                                
                                                                                                
                                                                                                -
                                                                                                
                                                                                                
                                                                                                
                                                                                                2,244Management
      and other fees, substantially all from related entities
                                                                                                
                                                                                                
                                                                                                63
                                                                                                
                                                                                                
                                                                                                
                                                                                                68Reimbursement
      of expenses related to managed entities
                                                                                                
                                                                                                
                                                                                                297
                                                                                                
                                                                                                
                                                                                                
                                                                                                381Total
      revenues
                                                                                                
                                                                                                
                                                                                                9,385
                                                                                                
                                                                                                
                                                                                                
                                                                                                12,140ExpensesRental
      property operating expenses
                                                                                                
                                                                                                
                                                                                                3,732
                                                                                                
                                                                                                
                                                                                                
                                                                                                3,825Cost
      of land sales
                                                                                                
                                                                                                
                                                                                                446
                                                                                                
                                                                                                
                                                                                                
                                                                                                903Cost
      of home sales
                                                                                                
                                                                                                
                                                                                                13
                                                                                                
                                                                                                
                                                                                                
                                                                                                1,717General,
      administrative, selling and marketing
                                                                                                
                                                                                                
                                                                                                2,337
                                                                                                
                                                                                                
                                                                                                
                                                                                                2,358Depreciation
                                                                                                
                                                                                                
                                                                                                1,257
                                                                                                
                                                                                                
                                                                                                
                                                                                                1,446Expenses
      reimbursed from managed entities
                                                                                                
                                                                                                
                                                                                                297
                                                                                                
                                                                                                
                                                                                                
                                                                                                381Total
      expenses
                                                                                                
                                                                                                
                                                                                                8,082
                                                                                                
                                                                                                
                                                                                                
                                                                                                10,630Operating
      Income
                                                                                                
                                                                                                
                                                                                                1,303
                                                                                                
                                                                                                
                                                                                                
                                                                                                1,510Other
      income (expense)Interest
      and other income
                                                                                                
                                                                                                
                                                                                                103
                                                                                                
                                                                                                
                                                                                                
                                                                                                174Equity
      in earnings from unconsolidated entities
                                                                                                
                                                                                                
                                                                                                97
                                                                                                
                                                                                                
                                                                                                
                                                                                                168Interest
      expense
                                                                                                
                                                                                                
                                                                                                (2,835
                                                                                                )
                                                                                                
                                                                                                
                                                                                                (2,472
                                                                                                )Loss
      before benefit for income taxes
                                                                                                
                                                                                                
                                                                                                (1,332
                                                                                                )
                                                                                                
                                                                                                
                                                                                                (620
                                                                                                )Benefit
      for income taxes
                                                                                                
                                                                                                
                                                                                                (1,169
                                                                                                )
                                                                                                
                                                                                                
                                                                                                (196
                                                                                                )Loss
      from continuing operations
                                                                                                
                                                                                                
                                                                                                (163
                                                                                                )
                                                                                                
                                                                                                
                                                                                                (424
                                                                                                )Income from
      discontinued operations(less
      applicable income taxes of $369,000 and ($208,000),
      respectively)
                                                                                                
                                                                                                
                                                                                                766
                                                                                                
                                                                                                
                                                                                                
                                                                                                390Consolidated
      net income (loss)
                                                                                                
                                                                                                
                                                                                                603
                                                                                                
                                                                                                
                                                                                                
                                                                                                (34
                                                                                                )Less:
      Net income attributable to noncontrolling interest
                                                                                                
                                                                                                
                                                                                                773
                                                                                                
                                                                                                
                                                                                                
                                                                                                1,159Net loss
      attributable to ACPT
                                                                                                
                                                                                                $
                                                                                                (170
                                                                                                )
                                                                                                
                                                                                                $
                                                                                                (1,193
                                                                                                )Loss per
      common share – Basic and DilutedLoss
      from continuing operations
                                                                                                
                                                                                                $
                                                                                                (0.03
                                                                                                )
                                                                                                
                                                                                                $
                                                                                                (0.08
                                                                                                )Discontinued
      operations, attributed to ACPT shareholders
                                                                                                
                                                                                                
                                                                                                0.06
                                                                                                
                                                                                                
                                                                                                
                                                                                                0.07Loss
      attributable to noncontrolling interest
                                                                                                
                                                                                                
                                                                                                (0.06
                                                                                                )
                                                                                                
                                                                                                
                                                                                                (0.22
                                                                                                )Loss
      applicable to common shareholders
                                                                                                
                                                                                                $
                                                                                                (0.03
                                                                                                )
                                                                                                
                                                                                                $
                                                                                                (0.23
                                                                                                )Weighted
      average common shares outstanding:Basic
      and Diluted
                                                                                                
                                                                                                
                                                                                                5,225
                                                                                                
                                                                                                
                                                                                                
                                                                                                5,211Cash
      dividends per common share
                                                                                                
                                                                                                $
                                                                                                -
                                                                                                
                                                                                                
                                                                                                $
                                                                                                -The
      accompanying notes are an integral part of these consolidated
      statements.


-3-
 Table of Contents





AMERICAN
      COMMUNITY PROPERTIES TRUSTCONSOLIDATED BALANCE SHEETS(In
      thousands, except share and per share amounts)As of
                                                                                                March 31,
                                                                                                2009
                                                                                              
                                                                                              
                                                                                              As
      of
                                                                                                December 31,
                                                                                                2008(Unaudited)ASSETSASSETS:Investments
      in real estate, at cost:Operating
      real estate, net of accumulated depreciationof
      $79,717 and $79,379, respectively
                                                                                              
                                                                                              $
                                                                                              82,835
                                                                                              
                                                                                              
                                                                                              $
                                                                                              82,918Land
      and development costs
                                                                                              
                                                                                              
                                                                                              96,549
                                                                                              
                                                                                              
                                                                                              
                                                                                              96,266Condominiums
      under construction
                                                                                              
                                                                                              
                                                                                              1,755
                                                                                              
                                                                                              
                                                                                              
                                                                                              1,745Rental
      projects under construction or development
                                                                                              
                                                                                              
                                                                                              10,037
                                                                                              
                                                                                              
                                                                                              
                                                                                              4,564Investments
      in real estate, net
                                                                                              
                                                                                              
                                                                                              191,176
                                                                                              
                                                                                              
                                                                                              
                                                                                              185,493Property
      and related assets held for sale
                                                                                              
                                                                                              
                                                                                              94,097
                                                                                              
                                                                                              
                                                                                              
                                                                                              93,628Cash
      and cash equivalents
                                                                                              
                                                                                              
                                                                                              19,595
                                                                                              
                                                                                              
                                                                                              
                                                                                              24,035Restricted
      cash and escrow deposits
                                                                                              
                                                                                              
                                                                                              10,869
                                                                                              
                                                                                              
                                                                                              
                                                                                              9,500Investments
      in unconsolidated real estate entities
                                                                                              
                                                                                              
                                                                                              5,544
                                                                                              
                                                                                              
                                                                                              
                                                                                              5,121Receivable
      from bond proceeds
                                                                                              
                                                                                              
                                                                                              3,777
                                                                                              
                                                                                              
                                                                                              
                                                                                              2,052Accounts
      receivable, net
                                                                                              
                                                                                              
                                                                                              862
                                                                                              
                                                                                              
                                                                                              
                                                                                              992Deferred
      tax assets
                                                                                              
                                                                                              
                                                                                              25,839
                                                                                              
                                                                                              
                                                                                              
                                                                                              28,540Property
      and equipment, net of accumulated depreciation
                                                                                              
                                                                                              
                                                                                              868
                                                                                              
                                                                                              
                                                                                              
                                                                                              898Deferred
      charges and other assets, net of amortization of$3,611
      and $2,764, respectively
                                                                                              
                                                                                              
                                                                                              5,703
                                                                                              
                                                                                              
                                                                                              
                                                                                              4,934Total
      Assets
                                                                                              
                                                                                              $
                                                                                              358,330
                                                                                              
                                                                                              
                                                                                              $
                                                                                              355,193LIABILITIES AND SHAREHOLDERS'
      EQUITYLIABILITIES:Non-recourse
      debt
                                                                                              
                                                                                              $
                                                                                              171,654
                                                                                              
                                                                                              
                                                                                              $
                                                                                              168,221Recourse
      debt
                                                                                              
                                                                                              
                                                                                              39,838
                                                                                              
                                                                                              
                                                                                              
                                                                                              39,416Accounts
      payable and accrued liabilities
                                                                                              
                                                                                              
                                                                                              20,605
                                                                                              
                                                                                              
                                                                                              
                                                                                              19,553Deferred
      income
                                                                                              
                                                                                              
                                                                                              145
                                                                                              
                                                                                              
                                                                                              
                                                                                              200Accrued
      current income tax liability
                                                                                              
                                                                                              
                                                                                              13,809
                                                                                              
                                                                                              
                                                                                              
                                                                                              14,754Liabilities
      related to assets held for sale
                                                                                              
                                                                                              
                                                                                              111,925
                                                                                              
                                                                                              
                                                                                              
                                                                                              111,812Total
      Liabilities
                                                                                              
                                                                                              
                                                                                              357,976
                                                                                              
                                                                                              
                                                                                              
                                                                                              353,956COMMITMENTS
      AND CONTINGENT LIABILITIES (NOTE 6)SHAREHOLDERS’
      EQUITYACPT’s
      shareholders equity:Common
      shares, $.01 par value, 10,000,000 shares authorized,5,229,954
      shares issued and outstandingas
      of March 31, 2009 and December 31, 2008
                                                                                              
                                                                                              
                                                                                              52
                                                                                              
                                                                                              
                                                                                              
                                                                                              52Treasury
      stock, 67,709 shares at cost
                                                                                              
                                                                                              
                                                                                              (376
                                                                                              )
                                                                                              
                                                                                              
                                                                                              (376
                                                                                              )Additional
      paid-in capital
                                                                                              
                                                                                              
                                                                                              18,254
                                                                                              
                                                                                              
                                                                                              
                                                                                              18,144Retained
      earnings
                                                                                              
                                                                                              
                                                                                              (16,649
                                                                                              )
                                                                                              
                                                                                              
                                                                                              (16,479
                                                                                              )Total
      ACPT shareholders’ equity
                                                                                              
                                                                                              
                                                                                              1,281
                                                                                              
                                                                                              
                                                                                              
                                                                                              1,341Noncontrolling
      interests
                                                                                              
                                                                                              
                                                                                              (927
                                                                                              )
                                                                                              
                                                                                              
                                                                                              (104
                                                                                              )Total  Shareholders’
      Equity
                                                                                              
                                                                                              
                                                                                              354
                                                                                              
                                                                                              
                                                                                              
                                                                                              1,237Total
      Liabilities and Shareholders’ Equity
                                                                                              
                                                                                              $
                                                                                              358,330
                                                                                              
                                                                                              
                                                                                              $
                                                                                              355,193


The
accompanying notes are an integral part of these consolidated
statements.


-4-
 Table of Contents








AMERICAN
      COMMUNITY PROPERTIES TRUSTCONSOLIDATED STATEMENTS OF CHANGES IN
      SHAREHOLDERS' EQUITY(In
      thousands, except share amounts)ACPT
      Shareholders’ EquityCommon
      Shares
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                Additional
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                Non-
                                                                
                                                                
                                                                TotalPar
                                                                
                                                                
                                                                Treasury
                                                                
                                                                
                                                                Paid-in
                                                                
                                                                
                                                                Retained
                                                                
                                                                
                                                                Controlling
                                                                
                                                                
                                                                Shareholders’Number
                                                                
                                                                
                                                                Value
                                                                
                                                                
                                                                Stock
                                                                
                                                                
                                                                Capital
                                                                
                                                                
                                                                Earnings
                                                                
                                                                
                                                                Interest
                                                                
                                                                
                                                                EquityBalance
      December 31, 2008
                                                                
                                                                
                                                                5,229,954
                                                                
                                                                
                                                                $
                                                                52
                                                                
                                                                
                                                                $
                                                                (376
                                                                )
                                                                
                                                                $
                                                                18,144
                                                                
                                                                
                                                                $
                                                                (16,479
                                                                )
                                                                
                                                                $
                                                                (104
                                                                )
                                                                
                                                                $
                                                                1,237Net
      income attributable to ACPT
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                (170
                                                                )
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                (170
                                                                )Net
      income attributable to noncontrolling interests
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                773
                                                                
                                                                
                                                                
                                                                773Dividends
      paid to noncontrolling interests
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                (1,596
                                                                )
                                                                
                                                                
                                                                (1,596
                                                                )Equity
      Compensation
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                110
                                                                
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                110Balance
      March 31, 2009 (unaudited)
                                                                
                                                                
                                                                5,229,954
                                                                
                                                                
                                                                $
                                                                52
                                                                
                                                                
                                                                $
                                                                (376
                                                                )
                                                                
                                                                $
                                                                18,254
                                                                
                                                                
                                                                $
                                                                (16,649
                                                                )
                                                                
                                                                $
                                                                (927
                                                                )
                                                                
                                                                $
                                                                354The
      accompanying notes are an integral part of these consolidated
      statements.


-5-
 Table of Contents








AMERICAN
      COMMUNITY PROPERTIES TRUSTCONSOLIDATED STATEMENTS OF CASH
      FLOWSFOR
      THE THREE MONTHS ENDED MARCH 31,(In
      thousands)(Unaudited)2009
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          2008Cash
      Flows from Operating ActivitiesConsolidated
      net income (loss)
                                                                                                                                                                          
                                                                                                                                                                          $
                                                                                                                                                                          603
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          $
                                                                                                                                                                          (34
                                                                                                                                                                          )Adjustments to reconcile net income (loss) to net cash providedby
      (used in) operating activities:Depreciation
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          1,284
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          2,597(Benefit)
      provision for deferred income taxes
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          201
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (508
                                                                                                                                                                          )Equity
      in earnings from unconsolidated entities
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (97
                                                                                                                                                                          )
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (168
                                                                                                                                                                          )Distribution
      of earnings from unconsolidated entities
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          151
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          168Cost
      of land sales
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          446
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          903Cost
      of home sales
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          13
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          1,717Write-down of assets
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          750
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          -Stock
      based compensation expense
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          118
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          36Amortization
      of deferred loan costs
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          205
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          219Changes
      in accounts receivable
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          151
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          790Additions
      to community development assets
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (4,360
                                                                                                                                                                          )
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (6,491
                                                                                                                                                                          )Homebuilding-construction
      expenditures
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (23
                                                                                                                                                                          )
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (65
                                                                                                                                                                          )Change
      in deferred income
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (55
                                                                                                                                                                          )
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (60
                                                                                                                                                                          )Change
      in other assets
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          1,020
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          901Changes
      in accounts payable, accrued liabilities
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          656
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (2,924
                                                                                                                                                                          )Net
      cash provided by (used in) operating activities
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          1,063
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (2,919
                                                                                                                                                                          )Cash
      Flows from Investing ActivitiesInvestment
      in rental property construction
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (1,842
                                                                                                                                                                          )
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (341
                                                                                                                                                                          )Change
      in investments - unconsolidated entities
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (477
                                                                                                                                                                          )
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          7Net
      deposits to restricted cash
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (903
                                                                                                                                                                          )
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          25Additions
      to rental operating properties, net
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (820
                                                                                                                                                                          )
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (759
                                                                                                                                                                          )Net
      purchase of other assets
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (1,552
                                                                                                                                                                          )
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (54
                                                                                                                                                                          )Net
      cash used in investing activities
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (5,594
                                                                                                                                                                          )
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (1,122
                                                                                                                                                                          )Cash
      Flows from Financing ActivitiesCash
      proceeds from debt financing
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          5,047
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          118Payment
      of debt
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (3,239
                                                                                                                                                                          )
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (956
                                                                                                                                                                          )County
      Bonds proceeds, net of undisbursed funds
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (121
                                                                                                                                                                          )
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          3,297Payments
      of distributions to noncontrolling interests
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (1,596
                                                                                                                                                                          )
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (1,121
                                                                                                                                                                          )Net
      cash provided by financing activities
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          91
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          1,338Net
      Decrease in Cash and Cash Equivalents
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (4,440
                                                                                                                                                                          )
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          (2,703
                                                                                                                                                                          )Cash
      and Cash Equivalents, Beginning of Period
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          24,035
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          24,912Cash
      and Cash Equivalents, End of Period
                                                                                                                                                                          
                                                                                                                                                                          $
                                                                                                                                                                          19,595
                                                                                                                                                                          
                                                                                                                                                                          
                                                                                                                                                                          $
                                                                                                                                                                          22,209The accompanying notes are
      an integral part of these consolidated statements.


-6-
 Table of Contents


AMERICAN
COMMUNITY PROPERTIES TRUST


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





(1)
            ORGANIZATION





American Community Properties Trust
(“ACPT”) is a self-managed holding company that is primarily engaged in the
business of investing in and managing multifamily rental properties as well as
community development and homebuilding.  ACPT’s operations are
primarily concentrated in the Washington, D.C. metropolitan area and Puerto
Rico and are carried out through its U.S. subsidiaries, American Rental
Properties Trust ("ARPT"), American Rental Management Company ("ARMC "),
American Land Development, Inc. ("ALD") and their subsidiaries and its Puerto
Rican subsidiary, IGP Group Corp. ("IGP Group").





ACPT is
taxed as a U.S. partnership and its income flows through to its
shareholders.  ACPT is subject to Puerto Rico income taxes on IGP Group’s
taxable income, generating foreign tax credits that have been passed through to
ACPT’s shareholders.  A federal tax regulation has been proposed that could
eliminate ACPT’s ability to pass through these foreign tax credits to its
shareholders.  Comments on the proposed regulation are currently being
evaluated, and the final regulation will be effective for tax years beginning
after the final regulation is ultimately published in the Federal
Register.  ACPT’s income consists of (i) certain passive income from
IGP Group, (ii) additional distributions from IGP Group including Puerto Rico
taxes paid on behalf of ACPT and (iii) dividends from ACPT’s U.S.
subsidiaries.  Other than Interstate Commercial Properties (“ICP”), which
is a subsidiary of IGP Group and is taxed as a Puerto Rico corporation, the
income from the remaining Puerto Rico operating entities passes through to IGP
Group or ALD.  Of this income, only the portion attributable to the
profits, losses or gains on the residential land sold in our Parque Escorial
property passes through to ALD.  ALD, ARMC, and ARPT are taxed as U.S.
corporations.





(2)
              LIQUIDITY
      RESOURCES AND DEBT MATURITIES




The
Company is in discussions with lenders to refinance or extend certain debt that
is scheduled to mature in the near term.  The Company’s loans contain
various financial, cross collateral, cross default, technical and restrictive
provisions.  The Company has one line of credit and one non-recourse
mortgage that mature in 2009.





In Puerto
Rico, a $10,000,000 credit facility, with an outstanding balance of $5,207,000
as of March 31, 2009, matures on August 31, 2009.   The Company
anticipates that the balance outstanding on this facility will be approximately
$8,300,000 as of August 31, 2009.   While the Company will seek
to refinance the line into a construction loan for the development of
residential condominiums or extend the term of the facility, the current state
of the credit market may prevent these plans from
occurring.  Interstate General Properties Limited Partnership S.E.
(“IGP”), another subsidiary of the Company, provided a guarantee on this credit
facility; however, the lender’s recourse under this guarantee is limited to the
collateral, except in the case of fraud, intentional misrepresentation, or
misappropriation of income associated with the collateral. In the event of a
default, the lender’s sole recourse is to foreclose on the
property.  An event of default on this facility will not affect any
other debt facility held by the Company. The collateral to support the line of
credit consists of approximately 500 acres of land, which has a cost basis of
$11,500,000 at March 31, 2009.  This property generates rental revenue
of approximately $228,000 annually for a quarry site.  The property is
also in the planning stages to be developed as the Company’s second planned
community in Puerto Rico.





Also in
Puerto Rico, the Company had a mortgage balance which was set to mature on April
30, 2009 but has been extended to May 31, 2009 as the Company completes the
renewal of the related property’s Housing Assistance Program (“HAP”)
contract.  As of March 31, 2009, the balance due was
$6,739,500.  Should the Company be unable to negotiate or refinance
with acceptable terms, the sole collateral for this mortgage is the Monserrate
Associates apartment property, which has a cost basis of $3,462,000 at March 31,
2009.  This property generated approximately $2,700,000 of revenue and
$400,000 of pre-tax income in 2008.





As a
result of the Company’s existing commitments and the downturn in the residential
real estate market, the Company expects to use its resources conservatively in
2009.  Anticipated cash flow from operations, existing loans,
refinanced or extended loans, asset sales, and new financing are expected to
meet financial commitments for the next twelve months.  However, there
are no assurances that these funds will be generated.  Even without
refinancing or extending existing loans, the Company has sufficient liquidity to
satisfy its obligations as they come due, with the exception of the Puerto Rico
debt discussed above.


-7-


(3)
            BASIS
      OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
    POLICIES





Basis
of Presentation





The
accompanying consolidated financial statements include the accounts of American
Community Properties Trust and its majority owned subsidiaries and partnerships,
after eliminating all intercompany transactions.  All of the entities
included in the consolidated financial statements are hereinafter referred to
collectively as the "Company" or "ACPT."





The
Company consolidates entities that are not variable interest entities as defined
by Financial Accounting Standard Board (“FASB”) Interpretation No. 46 (revised
December 2003) (“FIN 46 (R)”) in which it owns, directly or indirectly, a
majority voting interest in the entity.  In addition, the Company
consolidates entities, regardless of ownership percentage, in which the Company
serves as the general partner and the limited partners do not have substantive
kick-out rights or substantive participation rights in accordance with Emerging
Issues Task Force Issue 04-05, "Determining Whether a General
Partner, or the General Partners as a Group, Controls a LimitedPartnership or Similar Entity When
the Limited Partners Have Certain Rights," (“EITF 04-05”).  The
assets of consolidated real estate partnerships not 100% owned by the Company
are generally not available to pay creditors of the Company.





The consolidated group includes ACPT
and its four major subsidiaries, ARPT, ARMC, ALD, and IGP Group.  In
addition, the consolidated group includes the following other
entities:


Alturas
      del Senorial Associates Limited Partnership
                      
                      Land
      Development Associates S.E.American
      Housing Management Company
                      
                      LDA
      Group, LLCAmerican
      Housing Properties L.P.
                      
                      Milford
      Station I, LLCBannister
      Associates Limited Partnership
                      
                      Milford
      Station II, LLCBayamon
      Garden Associates Limited Partnership
                      
                      Monserrate
      Associates Limited PartnershipCarolina
      Associates Limited Partnership S.E.
                      
                      New
      Forest Apartments, LLCCoachman's
      Apartments, LLC
                      
                      Nottingham
      South, LLCColinas
      de San Juan Associates Limited Partnership
                      
                      Owings
      Chase, LLCCrossland
      Associates Limited Partnership
                      
                      Palmer
      Apartments Associates Limited PartnershipEscorial
      Office Building I, Inc.
                      
                      Prescott
      Square, LLCEssex
      Apartments Associates Limited Partnership
                      
                      St.
      Charles Community, LLCFox
      Chase Apartments, LLC
                      
                      San
      Anton Associates S.E.Gleneagles
      Apartments, LLC
                      
                      Sheffield
      Greens Apartments, LLCHeaden
      House Associates Limited Partnership
                      
                      Torres
      del Escorial, Inc.Huntington
      Associates Limited Partnership
                      
                      Turabo
      Limited Dividend PartnershipInterstate
      Commercial Properties, Inc.
                      
                      Valle
      del Sol Associates Limited PartnershipInterstate
      General Properties Limited Partnership, S.E.
                      
                      Village
      Lake Apartments, LLCJardines
      de Caparra Associates Limited Partnership
                      
                      Wakefield
      Terrace Associates Limited PartnershipLancaster
      Apartments Limited Partnership
                      
                      Wakefield
      Third Age Associates Limited
Partnership





The Company’s investments in entities
that it does not control are recorded using the equity method of
accounting.  Refer to Note 5 for further discussion regarding
Investments in Unconsolidated Real Estate Entities.





Interim
Financial Reporting





These
unaudited financial statements have been prepared in accordance with accounting
principles generally accepted in the United States ("GAAP") for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and note disclosures
normally included in financial statements prepared in accordance with GAAP have
been condensed or omitted. The Company has no items of other comprehensive
income for any of the periods presented. In the opinion of management, these
unaudited financial statements reflect all adjustments (which are of a normal
recurring nature) necessary to present a fair statement of results for the
interim period. While management believes that the disclosures presented are
adequate to make the information not misleading, these financial statements
should be read in conjunction with the financial statements and the notes
thereto included in the Company's Annual Report filed on Form 10-K for the year
ended December 31, 2008.  The operating results for the three months
ended March 31, 2009 and 2008, are not necessarily indicative of the results
that may be expected for the full year. Net income (loss) per share is
calculated based on weighted average shares outstanding.




Use
of Estimates
  The preparation of financial statements
in conformity with GAAP requires management to make estimates and assumptions
that affect the amounts reported in the financial statements, and accompanying
notes and disclosures. These estimates and assumptions are prepared using
management's best judgment after considering past and current events and
economic conditions. Actual results could differ from those estimates and
assumptions.


-8-
 Table of Contents


Sales,
Profit Recognition and Cost Capitalization




In accordance with Statement of
Financial Accounting Standard (“SFAS”) No. 66, “Accounting for Sales of Real
Estate,”community development land sales are recognized at closing only
when sufficient down payments have been obtained, possession and other
attributes of ownership have been transferred to the buyer, and ACPT has no
significant continuing involvement.  Under the provisions of SFAS 66,
related to condominium sales, revenues and costs are to be recognized when
construction is beyond the preliminary stage, the buyer is committed to the
extent of being unable to require a refund except for non-delivery of the unit,
sufficient units in the project have been sold to ensure that the property will
not be converted to rental property, the sales proceeds are collectible and the
aggregate sales proceeds and the total cost of the project can be reasonably
estimated.  Accordingly we recognize revenues and costs upon
settlement with the homebuyer which does not occur until after we receive use
and occupancy permits for the building.





The costs of developing the land are
allocated to our land assets and charged to cost of sales as the related
inventories are sold using the relative sales value method which rely on
estimated costs and sales values.   In accordance with SFAS No.
67 "Accounting for Costs and
Initial Rental Operations of Real Estate Projects", the costs of
acquiring and developing land are allocated to these assets and charged to cost
of sales as the related inventories are sold. Within our homebuilding
operations, the costs of acquiring the land and construction of the condominiums
are allocated to these assets and charged to cost of sales as the condominiums
are sold.  The cost of sales is determined by the percentage of
completion method.  The Company considers interest expense on all debt
available for capitalization to the extent of average qualifying assets for the
period.  Interest specific to the construction of qualifying assets,
represented primarily by our recourse debt, is first considered for
capitalization.  To the extent qualifying assets exceed debt
specifically identified, a weighted average rate including all other debt is
applied.  Any excess interest is reflected as interest
expense.





Impairment
of Long-Lived Assets and Adjustments to Assets Held for Sale




ACPT
carries its rental properties, homebuilding inventory, land and development
costs at the lower of cost or fair value in accordance with SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets."  For real estate assets such as our
rental properties which the Company plans to hold and use, which includes
property to be developed in the future, property currently under development and
real estate projects that are completed or substantially complete, we evaluate
whether the carrying amount of each of these assets will be recovered from their
undiscounted future cash flows arising from their use and eventual disposition.
 If the carrying value were to be greater than the undiscounted future cash
flows, we would recognize an impairment charge to the extent the carrying amount
is not recoverable.  Our estimates of the undiscounted operating cash flows
expected to be generated by each asset are performed on an individual project
basis and based on a number of assumptions that are subject to economic and
market uncertainties, including, among others, demand for apartment units,
competition, changes in market rental rates, and costs to operate and complete
each project.


Assets classified as held for sale are measured at the lower of their carrying
amount or fair value less costs to sell and are not depreciated or amortized
while classified as held for sale. Fair value of asets held for sale is based on
estimated future cash flows, which includes expected proceeds to be received.
ACPT recognizes a loss for any initial or subsequent write-down to fair value
less costs to sell and recognizes a gain for any subsequent increase in fair
value less costs to sell, up to the cumulative loss previously recognized.
During the first quarter of 2009, ACPT recognized a loss on write-down to fair
value less cost to sell of $750,000 related to the revaluation of the Baltimore
properties. Subsequent to the first quarter but prior to the issuance of the
quarterly report for the period ended March 31, 2009, the Company ceased
negotiations with the one buyer who was intent to purchase multiple properties
due to excessive re-trading. Accordingly, the broker is now looking to
individual buyers with compressed pricing for the properties that were grouped
together as a disposal group as of December 31, 2008. As a result, the Company
revised its estimated sales values determined though discussions with our
broker, which represent Level 3 inputs under the fair value hierarchy in SFAS
No. 157, “Fair Value
Measurements”, and an asset write-down was required to further reduce the
carrying values of the Baltimore properties to their estimated fair market value
less costs to sell.





The
Company evaluates, on an individual project basis, whether the carrying value of
its substantially completed real estate projects, such as our homebuilding
inventory that are to be sold, will be recovered based on the fair value less
cost to sell.  If the carrying value were to be greater than the fair value
less costs to sell, we would recognize an impairment charge to the extent the
carrying amount is not recoverable.  Our estimates of the fair value less
costs to sell are based on a number of assumptions that are subject to economic
and market uncertainties, including, among others, comparable sales, demand for
commercial and residential lots and competition.  The Company performed
similar reviews for land held for future development and sale considering such
factors as the cash flows associated with future development expenditures.
 Should this evaluation indicate that an impairment has occurred, the
Company will record an impairment charge equal to the excess of the historical
cost over fair value less costs to sell.  There were no impairment
charges for the three months ended March 31, 2009 and 2008 related to its
completed real estate projects.


-9-
 Table of Contents


Cash
and Cash Equivalents





Cash and
cash equivalents include cash on hand, unrestricted deposits with financial
institutions and short-term investments with original maturities of three months
or less. Restricted cash and escrow deposits include funds held in
restricted escrow accounts used for maintenance and capital improvements with
the approval of the U.S. Department of Housing and Urban Development (“HUD”)
and/or the State Finance Agency.  The account also includes tenant
security deposits as well as deposits collected within our homebuilding
operations as well as funds in an escrow account that are restricted for the
repayment of the Charles County bonds.




As of
March 31, 2009, the Company had cash and cash equivalents of $19,595,000 and
$10,869,000 in restricted cash.  Included in the Company’s cash and
cash equivalents is $10,962,000 of cash located within multifamily apartment
entities, over which the Company does not have direct control.  Cash
flow from our consolidated apartment properties whose mortgage loans are insured
by the Federal Housing Authority ("FHA"), or financed through the housing
agencies in Maryland, Virginia or Puerto Rico (the "Financing Agencies,") are
subject to guidelines and limits established by the apartment partnerships'
regulatory agreements with HUD and the State Financing Agencies.  For two
of our Puerto Rico partnerships, the regulatory agreements also require that if
cash from operations exceeds the allowable cash distributions, the surplus must
be deposited into restricted escrow accounts held by the mortgagee and
controlled by HUD or the applicable Financing Agency.





Depreciable
Assets and Depreciation





The
Company's operating real estate is stated at cost and includes all costs related
to acquisitions, development and construction.  The Company makes
assessments of the useful lives of our real estate assets for purposes of
determining the amount of depreciation expense to reflect on our income
statement on an annual basis. The assessments, all of which are judgmental
determinations, are as follows:





·
            Buildings
      and improvements are depreciated over five to forty years using the
      straight-line or double declining balance
  methods;


·
            Furniture,
      fixtures and equipment are depreciated over five to seven years using the
      straight-line method;


·
            Leasehold
      improvements are capitalized and depreciated over the lesser of the life
      of the lease or their estimated useful life; and●
            Maintenance
      and other repair costs are charged to operations as
  incurred.





Operating
Real Estate





The table
below presents the major classes of depreciable assets as of March 31, 2009 and
December 31, 2008 (in thousands):




March
      31,2009
                                    (Unaudited)
                                  
                                  
                                  December 31,2008Building
                                  
                                  $
                                  142,381
                                  
                                  
                                  $
                                  141,917Building
      improvements
                                  
                                  
                                  1,180
                                  
                                  
                                  
                                  1,463Equipment
                                  
                                  
                                  6,980
                                  
                                  
                                  
                                  6,912150,541
                                  
                                  
                                  
                                  150,292Less:Accumulated
      depreciation
                                  
                                  
                                  79,717
                                  
                                  
                                  
                                  79,37970,824
                                  
                                  
                                  
                                  70,913Land
                                  
                                  
                                  12,011
                                  
                                  
                                  
                                  12,005Operating
      properties, net
                                  
                                  $
                                  82,835
                                  
                                  
                                  $
                                  82,918





Other
Property and Equipment





In
addition, the Company owned other property and equipment of $890,000 and
$920,000, net of accumulated depreciation of $2,620,000 and $2,553,000,
respectively, as of March 31, 2009 and December 31, 2008,
respectively.  These balances include $22,000 which has been
reallocated to property and related assets held for sale.





Depreciation





Total
depreciation expense was $1,257,000 and $2,597,000 for the three months
ended March 31, 2009 and 2008, respectively.  For the three months
ended March 31, 2008, $1,151,000 has been reclassified as discontinued
operations.


-10-
 Table of Contents




Impact
of Recently Adopted Accounting Standards


In
September 2006, the FASB issued SFAS No. 157 which defines fair value,
establishes a framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value measurements.
SFAS No. 157 applies to accounting pronouncements that require or permit fair
value measurements, except for share-based payments under SFAS No. 123(R). We
adopted the recognition and disclosure provisions of SFAS No. 157 for financial
assets and financial liabilities and for nonfinancial assets and nonfinancial
liabilities that are re-measured at least annually effective January 1, 2008;
the adoption did not have a material impact on our financial position, results
of operations or cash flows. In accordance with the FASB Staff Position (“FSP”)
SFAS No. 157-2, “Effective Date of FASB Statement No. 157”, we adopted the
provisions of SFAS No. 157 for all other nonfinancial assets and nonfinancial
liabilities effective January 1, 2009 and the adoption did not have a material
impact on our financial position, results of operations or cash
flows.
  On December 4, 2007, the FASB issued SFAS 160,
"Noncontrolling Interests in Consolidated
Financial Statements, an amendment of ARB No. 51" ("SFAS 160").SFAS 160 replaces the concept of minority
interest with noncontrolling interests in
subsidiaries.  Noncontrolling interests are now reported as a
component of equity in the consolidated statement of financial
position.  Earnings attributable to noncontrolling interests will
continue to be reported as a part of consolidated earnings; however, SFAS 160
requires that income attributable to both controlling and noncontrolling
interests be presented separately on the face of the consolidated income
statement.  In addition, SFAS 160 provides that when losses
attributable to noncontrolling interests exceed the noncontrolling interest’s
basis, losses continue to be attributed to the noncontrolling interest as
opposed to being absorbed by the consolidating entity.  SFAS 160
requires retroactive adoption of the presentation and disclosure requirements
for existing minority interests. All other requirements of SFAS 160 shall
be applied prospectively.   The Company adopted SFAS 160 on
January 1, 2009.  The effect of adoption was a reclassification
of Minority Interest, historically shown in liabilities, to a new line item,
Noncontrolling Interests, included in shareholders’ equity, and the
reclassification of Minority Interest from Retained Earnings as it represented
distributions and losses in excess of basis.  See Note 4 for further
information regarding the effect of adoption of SFAS
160.





On
December 4, 2007, the FASB issued Statement No. 141R, “Business Combinations” (“SFAS
141R”).  This statement changes the accounting for acquisitions
specifically eliminating the step acquisition model, changing the recognition of
contingent consideration from being recognized when it is probable to being
recognized at the time of acquisition, disallowing the capitalization of
transaction costs and delays when restructurings related to acquisitions can be
recognized.  The Company adopted SFAS 141R on January 1, 2009 and did
not have a material impact.




In December 2008, the FASB
issued FSP No. FAS 140-4 and FIN 46(R)-8 Disclosures by Public Entities
(Enterprises) about Transfers of Financial Assets and Interests in Variable
Interest Entities.  This FSP amends FASB Statement No. 140,
Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities, to
require public entities to provide additional disclosures about transfers of
financial assets.  It also amends
FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest
Entities, to require public enterprises, including sponsors that have a
variable interest in a variable interest entity, to provide additional
disclosures about their involvement with variable interest entities. See Note 5
for the required disclosures.





Impact
of Recently Issued Accounting Standards





In April 2009, the FASB issued FSP
FAS 157-4, “Determining Fair
Value When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That are Not
Orderly” (“FSP FAS 157-4”). FSP FAS 157-4 provides additional guidance
for determining the fair value of assets and liabilities when the volume and
level of activity for the asset or liability have significantly decreased. FSP
FAS 157-4 also provides guidance on identifying circumstances that indicate an
observed transaction used to determine fair value is not orderly and, therefore,
is not indicative of fair value. FSP FAS 157-4 is effective for interim and
annual periods ending after June 15, 2009. The Company does not anticipate the
adoption of this FSP will have a material impact on its results of operations,
cash flows or financial condition.





In
April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value
of Financial Instruments. This FSP expands the fair value disclosure
requirements of Financial Accounting Standards No. 107, Disclosures about Fair Value of
Financial Instruments, to include interim periods, and amends APB Opinion
No. 28, Interim Financial
Reporting, to require these disclosures in summarized financial
information in interim reporting periods. This FSP is effective for interim
periods ending after June 15, 2009, with early adoption permitted under
certain circumstances.  We do not anticipate this FSP will have a
material effect on our financial statements.


-11-
 Table of Contents




(4)
            ADOPTION
      OF SFAS 160




The
following table illustrates the pro forma amounts of loss from continuing
operations, discontinued operations and net income that would have been
attributed to the Company’s shareholders for the three months ended
March 31, 2009, had the provisions of Accounting Research Bulletin
No. 51, prior to their amendment by SFAS 160 been applied (in thousands,
except per unit amounts):





Loss
      from continuing operations
                                                        
                                                        $
                                                        (851
                                                        )Loss from
      discontinued operations
                                                        
                                                        
                                                        (914
                                                        )Net
      loss attributable to ACPT’s shareholders
                                                        
                                                        $
                                                        (1,765
                                                        )Basic
      and diluted earnings (loss) per common unit:Loss
      from continuing operations
                                                        
                                                        $
                                                        (0.16
                                                        )Loss from
      discontinued operations
                                                        
                                                        
                                                        (0.17
                                                        )Net
      loss attributable to the ACPT’s shareholders
                                                        
                                                        $
                                                        (0.33
                                                        )





(5)
            INVESTMENT
      IN UNCONSOLIDATED REAL ESTATE
ENTITIES





The
Company accounts for investments in unconsolidated real estate entities that are
not considered variable interest entities under FIN 46(R) in accordance with SOP
78-9 "Accounting for
Investments in Real Estate Ventures"and APB Opinion No. 18 "The Equity Method of Accounting for
Investments in Common Stock".  For entities that are considered
variable interest entities under FIN 46(R), the Company performs an assessment
to determine the primary beneficiary of the entity as required by FIN 46(R)
based on a probability weighted cash flow analysis.  The Company accounts
for variable interest entities in which the Company is not a primary beneficiary
and does not bear a majority of the risk of expected loss in accordance with the
equity method of accounting.





Apartment
Partnerships





The
unconsolidated apartment partnerships as of March 31, 2009 and 2008 included
Brookside Gardens Limited Partnership (“Brookside”) and Lakeside Apartments
Limited Partnership (“Lakeside”) that collectively represent 110 rental
units.  We have determined that these two entities are variable
interest entities under FIN 46(R).  However, the Company is not
required to consolidate the partnerships due to the fact that the Company is not
the primary beneficiary and does not bear the majority of the risk of expected
losses.  The Company holds an economic interest in Brookside and Lakeside
but, as a general partner, we have significant influence over operations of
these entities that is disproportionate to our economic ownership.  In
accordance with SOP 78-9 and APB No. 18, these investments are accounted for
under the equity method.  The Company is exposed to losses consisting
of our net investment, loans and unpaid fees for Brookside of $242,000 and
$231,000 and for Lakeside of $148,000 and $165,000 as of March 31, 2009 and
December 31, 2008, respectively.  All amounts are fully reserved and,
accordingly, represented zero of the Company’s investments in unconsolidated
real estate entities for the periods presented.  Pursuant to the
partnership agreement for Brookside, the Company, as general partner, is
responsible for providing operating deficit loans to the partnership in the
event that it is not able to generate sufficient cash flows from its operating
activities.  The Company’s involvement with Brookside and Lakeside has
not had a material affect on the Company’s financial position, financial
performance and cash flows.


-12-
 Table of Contents


Commercial
Partnerships





The
Company holds a limited partner interest in a commercial property in Puerto Rico
that it accounts for under the equity method of accounting.  ELI, S.E.
("ELI"), is a partnership formed for the purpose of constructing a building for
lease to the State Insurance Fund of the Government of Puerto
Rico.  ACPT contributed the land in exchange for $700,000 and a 27.82%
ownership interest in the partnership's assets, equal to a 45.26% interest in
cash flow generated by the thirty-year lease of the building.





Land
Development/Homebuilding Joint Ventures





In
October 2008, the Company entered into an agreement with Surrey Homes, LLC
(“Surrey Homes”) to contribute $2,000,000 over the next year in exchange for a
50% ownership interest of the Series A Units.  During the fourth
quarter of 2008 and the first quarter of 2009, ACPT contributed $1,000,000 with
the remainder to be contributed during the second and third quarters of
2009.  Surrey Homes’ business model is focused on providing affordable
quality homes with the lowest ongoing cost of maintenance through energy
efficiency and other green initiatives.  Surrey Homes is establishing
itself as a low overhead, lot option home builder.





We have
determined that our investment in Surrey Homes is a variable interest entity
under FIN 46(R); however, we are not required to consolidate the partnership as
the Company is not the primary beneficiary and does not bear the majority of the
risk of expected losses.  In accordance with SOP 78-9 and APB No. 18,
this investment is accounted for under the equity method, and as of March 31,
2009 and December 31, 2008, represented $935,000 and $489,000 of the Company’s
investments in unconsolidated real estate entities, respectively.  The
Company is exposed to total losses consisting of our cumulative initial
investment of $1,000,000.  Other than funding the equity investment,
the Company’s involvement in Surrey Homes has not materially affected the
Company’s financial position, financial performance and cash flows.




The
following table summarizes the financial data and principal activities of the
unconsolidated real estate entities, which the Company accounts for under the
equity method.  The information is presented to segregate the
apartment partnerships from the commercial partnerships as well as our 50%
ownership interest in the land development joint venture and homebuilding
operation, which are all accounted for as “investments in unconsolidated real
estate entities” on the balance sheet.


-13-
 Table of Contents


Apartment
                              
                              
                              CommercialProperties
                              
                              
                              Property
                              
                              
                              Homebuilding
                              
                              
                              Total(in
      thousands)Summary of Financial
    PositionTotal
      AssetsMarch
      31, 2009
                              
                              $
                              4,751
                              
                              
                              $
                              27,374
                              
                              
                              $
                              2,914
                              
                              
                              $
                              35,039December
      31, 2008
                              
                              
                              4,781
                              
                              
                              
                              27,005
                              
                              
                              
                              2,478
                              
                              
                              
                              34,264Total
      Non-Recourse DebtMarch
      31, 2009
                              
                              
                              3,104
                              
                              
                              
                              22,375
                              
                              
                              
                              -
                              
                              
                              
                              25,479December
      31, 2008
                              
                              
                              3,123
                              
                              
                              
                              22,380
                              
                              
                              
                              -
                              
                              
                              
                              25,503Total
      Other LiabilitiesMarch
      31, 2009
                              
                              
                              980
                              
                              
                              
                              450
                              
                              
                              
                              30
                              
                              
                              
                              1,460December
      31, 2008
                              
                              
                              960
                              
                              
                              
                              153
                              
                              
                              
                              -
                              
                              
                              
                              1,113Total
      EquityMarch
      31, 2009 (2)
                              
                              
                              667
                              
                              
                              
                              4,549
                              
                              
                              
                              2,884
                              
                              
                              
                              8,100December
      31, 2008 (2)
                              
                              
                              698
                              
                              
                              
                              4,472
                              
                              
                              
                              2,478
                              
                              
                              
                              7,648Company's
      Investment, net (1)March
      31, 2009
                              
                              
                              -
                              
                              
                              
                              4,609
                              
                              
                              
                              935
                              
                              
                              
                              5,544December
      31, 2008
                              
                              
                              -
                              
                              
                              
                              4,632
                              
                              
                              
                              489
                              
                              
                              
                              5,121Summary of OperationsTotal
      RevenueThree
      Months Ended March 31, 2009
                              
                              
                              210
                              
                              
                              
                              859
                              
                              
                              
                              11
                              
                              
                              
                              1,080Three
      Months Ended March 31, 2008
                              
                              
                              208
                              
                              
                              
                              896
                              
                              
                              
                              -
                              
                              
                              
                              1,104Net
      Income (Loss)Three
      Months Ended March 31, 2009
                              
                              
                              (31
                              )
                              
                              
                              422
                              
                              
                              
                              (117
                              )
                              
                              
                              274Three
      Months Ended March 31, 2008
                              
                              
                              (35
                              )
                              
                              
                              456
                              
                              
                              
                              -
                              
                              
                              
                              421Company's
      recognition of equity in Earnings (Loss)Three
      Months Ended March 31, 2009
                              
                              
                              -
                              
                              
                              
                              151
                              
                              
                              
                              (54
                              )
                              
                              
                              97Three
      Months Ended March 31, 2008
                              
                              
                              -
                              
                              
                              
                              168
                              
                              
                              
                              -
                              
                              
                              
                              168Summary of Cash FlowsCash
      flows from operating activitiesThree
      Months Ended March 31, 2009
                              
                              
                              61
                              
                              
                              
                              799
                              
                              
                              
                              (87
                              )
                              
                              
                              773Three
      Months Ended March 31, 2008
                              
                              
                              5
                              
                              
                              
                              919
                              
                              
                              
                              (6
                              )
                              
                              
                              918Company's
      share of cash flows fromoperating
      activitiesThree
      Months Ended March 31, 2009
                              
                              
                              1
                              
                              
                              
                              362
                              
                              
                              
                              (43
                              )
                              
                              
                              320Three
      Months Ended March 31, 2008
                              
                              
                              -
                              
                              
                              
                              416
                              
                              
                              
                              (3
                              )
                              
                              
                              413Operating
      cash distributionsThree
      Months Ended March 31, 2009
                              
                              
                              -
                              
                              
                              
                              344
                              
                              
                              
                              
                              
                              
                              
                              344Three
      Months Ended March 31, 2008
                              
                              
                              -
                              
                              
                              
                              387
                              
                              
                              
                              -
                              
                              
                              
                              387Company's
      share of operatingcash
      distributionsThree
      Months Ended March 31, 2009
                              
                              
                              -
                              
                              
                              
                              174
                              
                              
                              
                              
                              
                              
                              
                              174Three
      Months Ended March 31, 2008
                              
                              
                              -
                              
                              
                              
                              176
                              
                              
                              
                              -
                              
                              
                              
                              176





Notes:


(1)
            Represents
      the Company's net investment, including assets and accrued liabilities in
      the consolidated balance sheet for unconsolidated real estate
      entities.


(2)
            In
      December 2007, the Company made a $300,000 equity contribution to Lakeside
      which was used by Lakeside to pay an equal portion of the Development Fee
      owed to the Company.  The Company both contributed and received
      the cash, and accordingly, the Company did not recognize fee income nor
      change its investment balance in
Lakeside.


-14-
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(6)
            DEBT





The Company's outstanding debt is
collateralized primarily by land, land improvements, homebuilding assets,
receivables, investment properties, investments in partnerships, and rental
properties.  The following table summarizes the indebtedness of the
Company at March 31, 2009 and December 31, 2008 (in thousands):





Maturity
                                    
                                    
                                    Interest
                                    
                                    
                                    Outstanding
      as ofDates
                                    
                                    
                                    Rates
                                    
                                    
                                    March
      31,
                                    
                                    
                                    December
      31,From/To
                                    
                                    
                                    From/To
                                    
                                    
                                    2009
                                    
                                    
                                    2008(Unaudited)Recourse
      DebtCommunity
      Development (a)(b)(c)(d)
                                    
                                    
                                    04-15-09/03-01-23
                                    
                                    
                                    
                                    3.25%/8%
                                    
                                    
                                    $
                                    39,662
                                    
                                    
                                    $
                                    39,232General
      obligations (e)
                                    
                                    
                                    06-01-09/03-13-12
                                    
                                    
                                    Non-interestbearing/8.55%
                                    
                                    
                                    
                                    176
                                    
                                    
                                    
                                    184Total
      Recourse Debt
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    39,838
                                    
                                    
                                    
                                    39,416Non-Recourse Debt(f)(g)Investment
      Properties
                                    
                                    
                                    12-01-13/07-01-50
                                    
                                    
                                    
                                    4.95%/6.9%
                                    
                                    
                                    
                                    171,654
                                    
                                    
                                    
                                    168,221Held for
      Sale – Non-Recourse Debt
                                    
                                    
                                    05-31-09/09-13-19
                                    
                                    
                                    
                                    5.95%/10%
                                    
                                    
                                    
                                    107,454
                                    
                                    
                                    
                                    107,899Total
      Non-Recourse Debt
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    279,108
                                    
                                    
                                    
                                    276,120Total
    Debt
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    $
                                    318,946
                                    
                                    
                                    $
                                    315,536





a.
            As
      of March 31, 2009, $26,835,000 of the community development recourse debt
      is owed to Charles County Commissioners and relates to the general
      obligation bonds issued by the Charles County government, with 15 year
      amortization of maturities with the earliest in June, 2019, as described
      in detail under the heading "Financial Commitments" in Note 6.  As of
      March 31, 2009, the Company has a receivable balance related to the bonds
      of $3,776,000.


b.
            On
      April 14, 2006, the Company closed a three year, $14,000,000 revolving
      acquisition and development loan (“the Revolver”) secured by a first lien
      deed of trust on property located in St. Charles,
      Maryland.  During the first quarter of 2009, the Company
      renegotiated the terms of the agreement.  The loan bears
      interest at Prime plus 1.25% (4.5% at March 31, 2009) and was set to
      mature on April 14, 2009 but has been extended to March 31,
      2010.  As of March 31, 2009, $4,371,000 was outstanding on the
      Revolver.


c.
            Land
      Development Associates, S.E (“LDA”) has a $10,000,000 revolving line of
      credit facility that bears interest at a fluctuating rate equivalent to
      the LIBOR Rate plus 225 basis points (3.51% as of March 31, 2009) and
      matures on August 31, 2009.  The facility is to be used to fund
      the development of infrastructure of Parque Escorial and Parque El
      Comandante.  The outstanding balance of this facility on March
      31, 2009, was $5,207,000.


d.
            On
      April 2, 2008, the Company secured a two-year, $3,600,000 construction
      loan for the construction of a commercial restaurant/office building
      within the O’Donnell Lake Restaurant Park.  The facility is
      secured by the land along with any improvements constructed and bears
      interest at Wall Street Journal published Prime Rate (3.25% at March 31,
      2009).  At the end of the two-year construction period, the
      Company may convert the loan to a 5-year permanent loan, amortized over a
      30 year period at a fixed interest rate to be determined.  As of
      March 31, 2009, $3,249,000 was outstanding under this facility leaving
      $351,000 available to fund completion of the
  building.


e.
            The
      general recourse debt outstanding as of March 31, 2009, is made up of
      various capital leases outstanding within our U.S. and Puerto Rico
      operations, as well as installment loans for vehicles and other
      miscellaneous equipment.


f.
            The
      non-recourse debt related to the investment properties is collateralized
      by the multifamily rental properties and the office building in Parque
      Escorial.  As of March 31, 2009, approximately $73,366,000 of
      this debt is secured by the Federal Housing Administration ("FHA") or the
      Maryland Housing Fund.


g.
            On
      May 12, 2008, IGP agreed to provide a fixed charge and debt service
      guarantee related to the Escorial Office Building I, Inc (“EOB”)
      mortgage.  The fixed charge and debt service guarantee requires
      IGP to contribute capital in cash in such amounts required to cause EOB to
      comply with the related financial covenants.  The guarantee will
      remain in full force until EOB has complied with the financial covenants
      for four consecutive quarters.





The Company’s loans contain various
financial, cross collateral, cross default, technical and restrictive
provisions.  As of March 31, 2009, the Company is in compliance with
all but one of its financial covenants and the other provisions of its loan
agreements.  As of March 31, 2009, the Company failed to meet the
Minimum Net Worth restriction at the ACPT level as tangible net worth was
$354,000.  The Company has received a waiver of this covenant
requirement through March 31, 2010.


-15-
 Table of Contents


(7)
            COMMITMENTS
      AND CONTINGENT LIABILITIES





Financial
Commitments





Pursuant
to an agreement reached between ACPT and the Charles County Commissioners in
2002, the Company agreed to accelerate the construction of two major roadway
links to the Charles County (the "County") road system.  As part of the
agreement, the County agreed to issue general obligation public improvement
bonds (the “Bonds”) to finance $20,000,000 of this construction guaranteed by
letters of credit provided by Lennar Corporation (“Lennar”) as part of a
residential lot sales contract for 1,950 lots in Fairway Village.  The
Bonds were issued in three installments with the final $6,000,000 installment
issued in March 2006.  The Bonds bear interest rates ranging from 4% to 8%,
for a blended lifetime rate for total Bonds issued to date of 5.1%, and call for
semi-annual interest payments and annual principal payments and mature in 15
years.  Under the terms of Bond repayment agreements between the
Company and the County, the Company is obligated to pay interest and principal
to the County based on the full amount of the Bonds; as such, the Company
recorded the full amount of the debt and a receivable from the County
representing the remaining Bond proceeds to be advanced to the Company as major
infrastructure development within the project occurs.  As part of the
agreement, the Company will pay the County a monthly payment equal to one-sixth
of the semi-annual interest payments and one-twelfth of the annual principal
payment.  The County and the Lennar agreement require ACPT to fund an
escrow account from lot sales to be used to repay the principal portion of these
Bonds.





In August
2005, the Company signed a memorandum of understanding ("MOU") with the Charles
County Commissioners regarding a land donation that is now the site of a minor
league baseball stadium and entertainment complex.  Under the terms of the
MOU, the Company donated 42 acres of land in St. Charles to the County on
December 31, 2005.  The Company also agreed to expedite off-site
utilities, storm-water management and road construction improvements that will
serve the entertainment complex and future portions of St. Charles so that the
improvements will be completed concurrently with the entertainment
complex.  In return, the County agreed to issue $12,000,000 of general
obligation bonds to finance the infrastructure improvements.  In March
2006, $4,000,000 of bonds were issued for this project, with an additional
$3,000,000 issued in both March 2007 and March 2008 and $2,000,000 in March
2009.  These bonds bear interest rates ranging from 4.9% to 8%, for a
blended rate of 5.3%, call for semi-annual interest payments and annual
principal payments, and mature in 15 years.  The terms of the bond
repayment agreement are similar to those noted above.  In addition,
the County agreed to issue an additional 100 school allocations a year to St.
Charles commencing with the issuance of bonds.





During
2006, the Company reached an agreement with the County whereby the Company
receives interest payments on any undistributed bond proceeds held in escrow by
the County.  The agreement covers the period from July 1, 2005 through
the last draw made by the Company.





As of March 31, 2009, ACPT has
purchased $18,089,000 of surety bonds for the completion of land development
projects with Charles County with maturity dates ranging from June 13, 2009 to
May 14, 2010; substantially all of which are for the benefit of the Charles
County Commissioners.





Consulting
Agreements and Severance Arrangements





ACPT entered into a consulting
agreement with Carlos Rodriguez, the former Executive Vice President and Chief
Executive Officer for IGP, a wholly owned Puerto Rico subsidiary of ACPT,
effective July 1, 2008.  Under the terms of the Consulting Agreement,
the Company will pay Mr. Rodriguez $100,000 per year through June
2010.  Payments under this consulting agreement were fully accrued as
of December 31, 2008.





On October 1, 2008, Mr. Edwin L. Kelly
notified the Company that he would retire as the Company’s President and Chief
Operating Officer effective December 1, 2008.  Pursuant to his
employment agreement, Mr. Kelly received a severance payment of
$1,500,000.  The Company has also agreed to enter into a consulting
agreement with Mr. Kelly providing compensation for his services at a rate of
$10,000 per month, for an initial term of one year.  Payments under this
consulting agreement were fully accrued as of December 31, 2008.


-16-
 Table of Contents




Gleneagles
Construction Contract










Guarantees





ACPT and
its subsidiaries typically provide guarantees for another subsidiary's loans. In
many cases more than one company guarantees the same debt. Since all of these
companies are consolidated, the debt or other financial commitment made by the
subsidiaries to third parties and guaranteed by ACPT, is included within ACPT's
consolidated financial statements.  As of March 31, 2009,
ACPT has guaranteed $39,663,000 of such debt.  The guarantees
will remain in effect until the debt service is fully repaid by the respective
borrowing subsidiary.  The terms of the debt service guarantees
outstanding range from one to nine years.   We do not expect any
of these guarantees to impair the individual subsidiary or the Company's ability
to conduct business or to pursue its future development plans.




Legal
Matters





There have been no material changes to
the legal proceedings previously disclosed in our Annual Report on the Form 10-K
for the three months ended March 31, 2009.




Due to
the inherent uncertainties of the judicial process, we are unable to either
predict the outcome of or estimate a range of potential loss associated with
certain matters discussed above.  While we intend to vigorously defend
these matters and believe we have meritorious defenses available to us, there
can be no assurance that we will prevail.  If these matters are not
resolved in our favor, we believe we are insured for potential losses unless
otherwise stated.  Any amounts that exceed our insurance coverage
could have a material adverse effect on our financial condition and results of
operations.





The
Company and/or its subsidiaries have been named as defendants, along with other
companies, in tenant-related lawsuits.  The Company carries liability
insurance against these types of claims that management believes meets industry
standards.  To date, payments made to the plaintiffs of the settled cases
were covered by our insurance policy.  The Company believes it has strong
defenses to these ordinary course claims, and intends to continue to defend
itself vigorously in these matters.





In the
normal course of business, ACPT is involved in various pending or unasserted
claims. In the opinion of management, these are not expected to have a material
impact on the financial condition or future operations of ACPT.





(8)
            RELATED
      PARTY TRANSACTIONS





Certain officers and trustees of ACPT
have ownership interests in various entities that conduct business with the
Company.  The financial impact of the related party transactions on
the accompanying consolidated financial statements is reflected below (in
thousands):


-17-
 Table of Contents


CONSOLIDATED
      STATEMENT OF INCOME:
                                                        
                                                        
                                                        Three
      Months EndedMarch
      31,2009
                                                        
                                                        
                                                        2008Management and Other FeesUnconsolidated
      subsidiaries with third party partners
                                                        (A)
                                                        
                                                        $
                                                        10
                                                        
                                                        
                                                        $
                                                        10Rental Property Revenues
                                                        (B)
                                                        
                                                        $
                                                        --
                                                        
                                                        
                                                        $
                                                        15Interest and Other IncomeUnconsolidated
      real estate entities with third party partners
                                                        
                                                        
                                                        $
                                                        2
                                                        
                                                        
                                                        $
                                                        2





General and Administrative
      ExpenseReserve
      additions (reductions) and other write-offs-Unconsolidated
      real estate entities with third party partners
                                                          
                                                          (A)
                                                          
                                                          
                                                          $
                                                          (4
                                                          )
                                                          
                                                          $
                                                          (22
                                                          )Reimbursement
      to IBC for ACPT's share of J. Michael Wilson's salary
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          104
                                                          
                                                          
                                                          
                                                          104Reimbursement
      of administrative costs-Affiliates
      of J. Michael Wilson, Chairman
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          (4
                                                          )
                                                          
                                                          
                                                          (5
                                                          )Consulting
      FeesJames
      J. Wilson, IGC Chairman and Director
                                                          
                                                          
                                                          (B1
                                                          )
                                                          
                                                          
                                                          --
                                                          
                                                          
                                                          
                                                          50Thomas
      J. Shafer, Trustee
                                                          
                                                          
                                                          (B2
                                                          )
                                                          
                                                          
                                                          5
                                                          
                                                          
                                                          
                                                          15$
                                                          101
                                                          
                                                          
                                                          $
                                                          142BALANCE
      SHEET:
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          Balance
                                                          
                                                          
                                                          BalanceMarch
      31,
                                                          
                                                          
                                                          December
      31,2009
                                                          
                                                          
                                                          2008Other AssetsReceivables
      - All unsecured and due on demandUnconsolidated
      Subsidiaries
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          $
                                                          4
                                                          
                                                          
                                                          $
                                                          10Affiliate
      of J. Michael Wilson, Chairman
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          6
                                                          
                                                          
                                                          
                                                          2Total
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          $
                                                          10
                                                          
                                                          
                                                          $
                                                          12Additional
      Paid-in Capital
                                                          
                                                          
                                                          (B3
                                                          )
                                                          
                                                          $
                                                          13
                                                          
                                                          
                                                          $
                                                          562





(A)
            Management and Other
      Services





The
Company provides management and other support services to its unconsolidated
subsidiaries and other affiliated entities in the normal course of
business.  The fees earned from these services are typically collected
on a monthly basis, one month in arrears.  Receivables are unsecured
and due on demand.  Certain partnerships experiencing cash shortfalls
have not paid timely.  Generally, receivable balances of these
partnerships are fully reserved, until satisfied or the prospect of
collectibility improves.  The collectibility of management fee receivables
is evaluated quarterly.  Any increase or decrease in the reserves is
reflected accordingly as additional bad debt expenses or recovery of such
expenses.





(B)
            Other





Other transactions with related parties
are as follows:


1)
            Represents
      fees paid to James J. Wilson pursuant to a consulting and retirement
      agreement.  At Mr. Wilson's request, payments are made to
      Interstate Waste Technologies, Inc.
(“IWT”).


2)
            Represents
      fees paid to Thomas J. Shafer, a Trustee, pursuant to a consulting
      agreement.


3)
            A
      primary shareholder of the Company agreed in principle to provide the
      Company’s Chief Executive Officer with the economic benefit of 185,550
      shares of their common stock as of October 1, 2008. According to SFAS
      123(R), any share-based payments awarded to an employee of the reporting
      entity by a related party for services provided to the entity are
      share-based payment transactions under SFAS123(R) unless the transfer is
      clearly for a purpose other than compensation for services to the
      reporting entity.  Therefore, in essence, the economic interest
      holder makes a capital contribution to the reporting entity, and the
      reporting entity makes a share-based payment to its employee in exchange
      for services rendered.   The Company recognized $13,000 in
      compensation expense in the three months ended March 31, 2009 related to
      this grant.


-18-
 Table of Contents




(9)
            INCOME
      TAXES





ACPT’s
subsidiaries, ARMC, ALD and ARPT, are subject to federal and state income
tax.  ACPT is subject to Puerto Rico income tax on its Puerto Rico
source income.





The
United States effective tax rates for the three months ended March 31, 2009 and
2008 were 50% and 22%, respectively.  The statutory rate is 40%.  The
difference in the statutory tax rate and the effective tax rate for the pre-tax
loss during the three months ended March 31, 2009 was primarily due to accrued
taxes and penalties on uncertain tax positions and the change in the deferred
tax asset valuation allowance.  The difference in the statutory tax rate
and the effective tax rate for the pre-tax loss during the three months ended
March 31, 2008 was primarily due to  a relatively small net loss reported,
the related benefit for which, was partially offset by accrued taxes and
penalties on uncertain tax position





The
effective tax rates on the Puerto Rico source income for the three months ended
March 31, 2009 and 2008 were 24%, and 33%, respectively.  The statutory
rate is 29%.   The difference in the statutory tax rate and the
effective tax rate for the pre-tax income during the three months ended March
31, 2009, was primarily due to tax exempt income and the change in the deferred
tax asset valuation allowance offset in part by deferred items for which no
current benefit may be recognized and as a result of the pending sale, a basis
adjustment to Company’s investment in the Puerto Rican apartment
properties.  The difference in the statutory tax rate and the effective tax
rate for the pre-tax loss during the three months ended March 31, 2008, was
primarily due to tax exempt income offset in part by the double taxation on the
earnings of our wholly owned corporate subsidiary, ICP, and deferred items for
which no current benefit may be recognized.





The total
amount of unrecognized tax benefits as of March 31, 2009, was
$14,359,000.  Included in the balance at March 31, 2009, were $46,000
of tax positions that, if recognized, would affect the effective tax
rate.  A reconciliation of the beginning and ending amount of
unrecognized tax benefit (in thousands) is as follows:





Unrecognized
      tax benefit at December 31, 2008
                        
                        $
                        15,543Change
      attributable to tax positions taken during a prior period
                        
                        
                        (1,184
                        )Change
      attributable to tax positions taken during the current
    period
                        
                        
                        -Decrease
      attributable to settlements with taxing authorities
                        
                        
                        -Decrease
      attributable to lapse of statute of limitations
                        
                        
                        -Unrecognized
      tax benefit at March 31, 2009
                        
                        $
                        14,359





In
accordance with our accounting policy, we present accrued interest related to
uncertain tax positions as a component of interest expense and accrued penalties
as a component of income tax expense on the Consolidated Statement of
Income.  Our Consolidated Statements of Income for the quarters ended
March 31, 2009 and 2008, included interest expense of $336,000 and $335,000,
respectively and penalties of ($8,000) and $24,000, respectively.  Our
Consolidated Balance Sheets as of March 31, 2009 and 2008, included accrued
interest of $4,553,000 and $3,149,000, respectively and accrued penalties of
$1,106,000 and $1,109,000, respectively.





The
Company currently does not have any tax returns under audit by the United States
Internal Revenue Service or the Puerto Rico Treasury
Department.  However, the tax returns filed in the Unites States for
the years ended December 31, 2005 through 2008 remain subject to
examination.  For Puerto Rico, the tax returns for the years ended
December 31, 2004 through 2008 remain subject to examination.  Within
the next twelve months, the Company does not anticipate any payments related to
settlement of any tax examinations.  There is a reasonable possibility
within the next twelve months the amount of unrecognized tax benefits will
decrease by $576,000 when the related statutes of limitations expire and certain
payments are recognized as taxable income.





(10)
            HELD
      FOR SALE ASSETS





A real
estate investment held for sale is carried at the lower of its carrying amount
or estimated fair value, less the cost of a potential sale.  Depreciation
is suspended during the period the property is held for sale.  During the
first quarter of 2009, the Company executed purchase agreements for the sale of
three of the five U.S. apartment properties in Baltimore, Maryland for
$29,200,000 (Owings Chase, Milford I and Milford II).  However, these
agreements have been terminated due to excessive re-trading by the potential
buyers.  The Company is in the process of working with their broker to
identify new buyers for these properties.  Related to the other two
Baltimore properties, Nottingham and Prescott, the Company has subsequently
executed purchase agreements totaling $6,598,000.  The Company intends to
sell all five of these properties and accordingly, believes that held for sale
presentation is appropriate.


-19-
 Table of Contents


Also, in
the first quarter of 2009, the Company executed a definitive agreement to sell
the Puerto Rico apartment properties for $14,300,000.  The definitive
agreement is subject to customary closing conditions, including the ability of
the purchaser to obtain financing, and we anticipate closing on the sale of
these properties in the second or third quarter of 2009.  The assets,
liabilities, and results of operations for IGP comprise the Puerto Rican Real
Estate Operating segment.




In
accordance with SFAS No. 144, the carrying values of the Baltimore and Puerto
Rican Properties’ assets and related liabilities have been classified as “held
for sale” on the Company’s consolidated balance sheets at March 31, 2009 and
December 31, 2008. As of March 31, 2009, the major classes of assets included in
assets held for sale are $72,747,000 in investments in real estate, $10,633,000
in restricted cash and escrow balances, and $3,504,000 in deferred charges and
other assets.  Liabilities related to assets held for sale includes
$107,454,000 in non-recourse debt.





In addition, the properties’ results of
operations have been classified as “discontinued operations” for all periods
presented in the consolidated statements of operations.  The following
is a summary of the components of income from discontinued operations for the
three months ended March 31, 2009 and 2008.





2009
                                                                                                            
                                                                                                            
                                                                                                            2008RevenuesRental
      property revenues
                                                                                                            
                                                                                                            $
                                                                                                            7,166
                                                                                                            
                                                                                                            
                                                                                                            $
                                                                                                            6,997Management
      and other fees
                                                                                                            
                                                                                                            
                                                                                                            121
                                                                                                            
                                                                                                            
                                                                                                            
                                                                                                            120Total
      revenues
                                                                                                            
                                                                                                            
                                                                                                            7,287
                                                                                                            
                                                                                                            
                                                                                                            
                                                                                                            7,117ExpensesRental
      property operating expenses
                                                                                                            
                                                                                                            
                                                                                                            3,451
                                                                                                            
                                                                                                            
                                                                                                            
                                                                                                            3,513General,
      administrative, selling, and marketing
                                                                                                            
                                                                                                            
                                                                                                            260
                                                                                                            
                                                                                                            
                                                                                                            
                                                                                                            512Write-down
      of assets
                                                                                                            
                                                                                                            
                                                                                                            750
                                                                                                            
                                                                                                            
                                                                                                            
                                                                                                            -Depreciation
      expense
                                                                                                            
                                                                                                            
                                                                                                            27
                                                                                                            
                                                                                                            
                                                                                                            
                                                                                                            1,151Total
      expenses
                                                                                                            
                                                                                                            
                                                                                                            4,488
                                                                                                            
                                                                                                            
                                                                                                            
                                                                                                            5,176Operating
      Income
                                                                                                            
                                                                                                            
                                                                                                            2,799
                                                                                                            
                                                                                                            
                                                                                                            
                                                                                                            1,941Other
      expenseInterest
      expense
                                                                                                            
                                                                                                            
                                                                                                            (1,664
                                                                                                            )
                                                                                                            
                                                                                                            
                                                                                                            (1,759
                                                                                                            )Income before
      provision (benefit) for income taxes
                                                                                                            
                                                                                                            
                                                                                                            1,135
                                                                                                            
                                                                                                            
                                                                                                            
                                                                                                            182Provision
      (benefit) for income taxes
                                                                                                            
                                                                                                            
                                                                                                            369
                                                                                                            
                                                                                                            
                                                                                                            
                                                                                                            (208
                                                                                                            )Income from
      discontinued operations
                                                                                                            
                                                                                                            
                                                                                                            766
                                                                                                            
                                                                                                            
                                                                                                            
                                                                                                            390Noncontrolling interest in consolidated
      entities
                                                                                                            
                                                                                                            
                                                                                                            (467
                                                                                                            )
                                                                                                            
                                                                                                            
                                                                                                            (1,155
                                                                                                            )Income (loss) from discontinued operations attributable to ACPT
                                                                                                            
                                                                                                            $
                                                                                                            299
                                                                                                            
                                                                                                            
                                                                                                            $
                                                                                                            (765
                                                                                                            )




(11)
            SEGMENT
      INFORMATION





In the first quarter of 2009, ACPT
operated in two principal lines of business: Operating Real Estate and Land
Development.  The Operating Real Estate segment is comprised of ACPT’s
investments in rental properties and property management services; whereas, the
Land Development segment is comprised of ACPT’s community development and
homebuilding services.  This represents a change from ACPT’s historical
financial reporting practice of evaluating the company solely based on
geographical location.  During the fourth quarter of 2008, the Company
had a change in senior management.   The chief operating decision
maker emphasizes net operating income as a key measurement of segment profit or
loss.  Segment net operating income is generally defined as segment
revenues less direct segment operating expenses. Management is now
evaluating the Company based on its operating lines of business, Operating Real
Estate and Land Development.  While ACPT continues to report operating
results on a consolidated basis, it also now reports separately the operating
results of its two lines of business.  The Company has reclassified
its segment presentation for 2008 to include the results of these segments.
  The accounting policies of the segments are the same as those
described in the summary of significant accounting policies.


-20-


Operating
Real Estate





The
Operating Real Estate segments in the U.S. and Puerto Rico are comprised of
investments in rental properties and property management
services.  The Operations are managed through ARPT, ARMC, and IGP, a
wholly owned subsidiary of IGP Group Corp., which is a wholly owned subsidiary
of ACPT.  ARPT and its subsidiaries hold the general and limited
partnership interests in our U.S. Operating Real Estate apartment property
portfolio.  The apartment properties are individually organized into
separate entities.  ARPT's ownership in these entities ranges from 0.1% to
100%.  The U.S. Operating Real Estate operations also include the
management of apartment properties in which we have an ownership interest and
one apartment property owned by a third party in 2008.  Effective
March 1, 2009, ARMC no longer manages the rental community not owned by
ACPT. During the first quarter of 2009, the Company decided to sell five of
its U.S. apartment properties located in Baltimore, Maryland (Nottingham and
Prescott, Owings Chase, Milford I and Milford II) and is currently working with
a broker to complete the five Baltimore transactions.  The financial
impact of these properties has been included as “Held for Sale” and
“Discontinued Operations” in the segment disclosures below.





For
      the three months endedU.S. Operating Real Estate:
                                                                  
                                                                  March
      31, 2009
                                                                  
                                                                  
                                                                  March
      31, 2008Operating
      revenues
                                                                  
                                                                  $
                                                                  8,294
                                                                  
                                                                  
                                                                  $
                                                                  8,296Operating
      expenses
                                                                  
                                                                  
                                                                  3,587
                                                                  
                                                                  
                                                                  
                                                                  3,675Net
      operating income
                                                                  
                                                                  
                                                                  4,707
                                                                  
                                                                  
                                                                  
                                                                  4,621Management
      and other fees, substantially all from related entities
                                                                  
                                                                  
                                                                  32
                                                                  
                                                                  
                                                                  
                                                                  38General,
      administrative, selling and marketing
                                                                  
                                                                  
                                                                  (381
                                                                  )
                                                                  
                                                                  
                                                                  (338
                                                                  )Depreciation
                                                                  
                                                                  
                                                                  (1,159
                                                                  )
                                                                  
                                                                  
                                                                  (1,351
                                                                  )Operating
      income
                                                                  
                                                                  
                                                                  3,199
                                                                  
                                                                  
                                                                  
                                                                  2,970Other
      expense
                                                                  
                                                                  
                                                                  (2,089
                                                                  )
                                                                  
                                                                  
                                                                  (1,935
                                                                  )Income
      before provision for income taxes
                                                                  
                                                                  
                                                                  1,110
                                                                  
                                                                  
                                                                  
                                                                  1,035Provision
      for income taxes
                                                                  
                                                                  
                                                                  53
                                                                  
                                                                  
                                                                  
                                                                  500Income  from
      continuing operations
                                                                  
                                                                  
                                                                  1,057
                                                                  
                                                                  
                                                                  
                                                                  535Discontinued
      operations
                                                                  
                                                                  
                                                                  (596
                                                                  )
                                                                  
                                                                  
                                                                  (184
                                                                  )Net
      income
                                                                  
                                                                  $
                                                                  461
                                                                  
                                                                  
                                                                  $
                                                                  351




As
      of
                                                          
                                                          
                                                          As
      ofU.S. Operating Real Estate Balance
      Sheet:
                                                          
                                                          March
      31,
                                                            2009
                                                          
                                                          
                                                          December
      31, 2008ASSETSInvestments
      in real estate, net
                                                          
                                                          $
                                                          76,502
                                                          
                                                          
                                                          $
                                                          75,120Cash
      and cash equivalents
                                                          
                                                          
                                                          7,550
                                                          
                                                          
                                                          
                                                          7,008Restricted
      cash and escrow deposits
                                                          
                                                          
                                                          8,666
                                                          
                                                          
                                                          
                                                          6,996Deferred
      tax assets
                                                          
                                                          
                                                          7,800
                                                          
                                                          
                                                          
                                                          7,576Deferred
      charges and other assets, net of amortization
                                                          
                                                          
                                                          54,746
                                                          
                                                          
                                                          
                                                          53,048Property
      and related assets, held for sale
                                                          
                                                          
                                                          36,806
                                                          
                                                          
                                                          
                                                          37,498Total
      Assets
                                                          
                                                          $
                                                          192,070
                                                          
                                                          
                                                          $
                                                          187,246LIABILITIES AND SHAREHOLDERS'
      EQUITYLIABILITIESNon-recourse
      debt
                                                          
                                                          $
                                                          163,278
                                                          
                                                          
                                                          $
                                                          159,822Recourse
      debt
                                                          
                                                          
                                                          254
                                                          
                                                          
                                                          
                                                          257Other
      liabilities
                                                          
                                                          
                                                          8,693
                                                          
                                                          
                                                          
                                                          6,589Accrued
      income tax liability-current
                                                          
                                                          
                                                          (723
                                                          )
                                                          
                                                          
                                                          (1,047
                                                          )Liabilities
      related to assets held for sale
                                                          
                                                          
                                                          31,358
                                                          
                                                          
                                                          
                                                          31,310Total
      Liabilities
                                                          
                                                          
                                                          202,860
                                                          
                                                          
                                                          
                                                          196,931Total
      Shareholders' Equity
                                                          
                                                          
                                                          (10,790
                                                          )
                                                          
                                                          
                                                          (9,685
                                                          )Total
      Liabilities and Shareholders' Equity
                                                          
                                                          $
                                                          192,070
                                                          
                                                          
                                                          $
                                                          187,246


-21-
 Table of Contents


For
      the three months endedPuerto
      Rican Operating Real Estate:
                                                        
                                                        March
      31,
                                                          2009
                                                        
                                                        
                                                        March
      31,
                                                          2008Operating
      revenues
                                                        
                                                        $
                                                        200
                                                        
                                                        
                                                        $
                                                        105Operating
      expenses
                                                        
                                                        
                                                        151
                                                        
                                                        
                                                        
                                                        156Net
      operating income
                                                        
                                                        
                                                        49
                                                        
                                                        
                                                        
                                                        (51
                                                        )Management
      and other fees, substantially all from related entities
                                                        
                                                        
                                                        38
                                                        
                                                        
                                                        
                                                        37General,
      administrative, selling and marketing
                                                        
                                                        
                                                        (254
                                                        )
                                                        
                                                        
                                                        (267
                                                        )Depreciation
                                                        
                                                        
                                                        (57
                                                        )
                                                        
                                                        
                                                        (57
                                                        )Operating
      income
                                                        
                                                        
                                                        (224
                                                        )
                                                        
                                                        
                                                        (338
                                                        )Other
      expense
                                                        
                                                        
                                                        (190
                                                        )
                                                        
                                                        
                                                        (201
                                                        )Loss
      before (benefit) provision for income taxes
                                                        
                                                        
                                                        (414
                                                        )
                                                        
                                                        
                                                        (539
                                                        )(Benefit)
      provision for income taxes
                                                        
                                                        
                                                        (366
                                                        )
                                                        
                                                        
                                                        271Loss
      from continuing operations
                                                        
                                                        
                                                        (48
                                                        )
                                                        
                                                        
                                                        (810
                                                        )Discontinued
      operations
                                                        
                                                        
                                                        1,362
                                                        
                                                        
                                                        
                                                        574Net
      income (loss)
                                                        
                                                        $
                                                        1,314
                                                        
                                                        
                                                        $
                                                        (236
                                                        )





As
      of
                                                        
                                                        
                                                        As
      ofPuerto Rican Operating Real Estate Balance
      Sheet:
                                                        
                                                        March
      31,
                                                          2009
                                                        
                                                        
                                                        December
      31, 2008ASSETSInvestments
      in real estate
                                                        
                                                        $
                                                        9,467
                                                        
                                                        
                                                        $
                                                        9,524Cash
      and cash equivalents
                                                        
                                                        
                                                        7,083
                                                        
                                                        
                                                        
                                                        6,825Restricted
      cash and escrow deposits
                                                        
                                                        
                                                        122
                                                        
                                                        
                                                        
                                                        103Investments
      in unconsolidated real estate entities
                                                        
                                                        
                                                        6,127
                                                        
                                                        
                                                        
                                                        6,818Deferred
      charges and other assets, net of amortization
                                                        
                                                        
                                                        10,469
                                                        
                                                        
                                                        
                                                        12,353Property
      and related assets, held for sale
                                                        
                                                        
                                                        57,291
                                                        
                                                        
                                                        
                                                        56,129Total
      Assets
                                                        
                                                        $
                                                        90,559
                                                        
                                                        
                                                        $
                                                        91,752LIABILITIES AND SHAREHOLDERS'
      EQUITYLIABILITIESNon-recourse
      debt
                                                        
                                                        $
                                                        8,376
                                                        
                                                        
                                                        $
                                                        8,400Other
      liabilities
                                                        
                                                        
                                                        7,713
                                                        
                                                        
                                                        
                                                        6,800Accrued
      income tax liability-current
                                                        
                                                        
                                                        (222
                                                        )
                                                        
                                                        
                                                        (1
                                                        )Liabilities
      related to assets held for sale
                                                        
                                                        
                                                        80,566
                                                        
                                                        
                                                        
                                                        80,502Total
      Liabilities
                                                        
                                                        
                                                        96,433
                                                        
                                                        
                                                        
                                                        95,701Total
      Shareholders' Equity
                                                        
                                                        
                                                        (5,874
                                                        )
                                                        
                                                        
                                                        (3,949
                                                        )Total
      Liabilities and Shareholders' Equity
                                                        
                                                        $
                                                        90,559
                                                        
                                                        
                                                        $
                                                        91,752




-22-
 Table of Contents


Land
Development





The Land Development Operation involves
community development and homebuilding services in the U.S. and Puerto
Rico.  The Operations are managed through ALD and LDA.  ALD
and its subsidiary comprise the U.S. Land Development operations and own and
develop our land holdings in St. Charles, Maryland. St. Charles is a 9,000 acre
planned community consisting of residential, commercial, recreational and open
space land.  We also remain open to construction and acquisition of
additional properties that will add value to our existing investment
assets.





For
      the three months endedU.S. Land Development
      Operations:
                                                      
                                                      March
      31,
                                                        2009
                                                      
                                                      
                                                      March
      31,
                                                        2008Operating
      revenuesCommunity
      development - land sales
                                                      
                                                      $
                                                      531
                                                      
                                                      
                                                      $
                                                      1,046Operating
      expensesCost
      of land sales
                                                      
                                                      
                                                      446
                                                      
                                                      
                                                      
                                                      903General,
      administrative, selling and marketing
                                                      
                                                      
                                                      1,017
                                                      
                                                      
                                                      
                                                      771Depreciation
                                                      
                                                      
                                                      1
                                                      
                                                      
                                                      
                                                      1Total
      expenses
                                                      
                                                      
                                                      1,464
                                                      
                                                      
                                                      
                                                      1,675Operating
      loss
                                                      
                                                      
                                                      (933
                                                      )
                                                      
                                                      
                                                      (629
                                                      )Other
      expense
                                                      
                                                      
                                                      (652
                                                      )
                                                      
                                                      
                                                      (678
                                                      )Loss
      before benefit for income taxes
                                                      
                                                      
                                                      (1,585
                                                      )
                                                      
                                                      
                                                      (1,307
                                                      )Benefit
      for income taxes
                                                      
                                                      
                                                      (690
                                                      )
                                                      
                                                      
                                                      (882
                                                      )Net
      loss
                                                      
                                                      $
                                                      (895
                                                      )
                                                      
                                                      $
                                                      (425
                                                      )





As
      of
                                                          
                                                          
                                                          As
      ofU.S. Land Development Balance
      Sheet:
                                                          
                                                          March
      31,
                                                            2009
                                                          
                                                          
                                                          December
      31, 2008ASSETSInvestments
      in real estate
                                                          
                                                          $
                                                          84,952
                                                          
                                                          
                                                          $
                                                          81,821Cash
      and cash equivalents
                                                          
                                                          
                                                          4,900
                                                          
                                                          
                                                          
                                                          10,140Restricted
      cash and escrow deposits
                                                          
                                                          
                                                          2,082
                                                          
                                                          
                                                          
                                                          2,399Deferred
      tax assets
                                                          
                                                          
                                                          18,644
                                                          
                                                          
                                                          
                                                          19,151Deferred
      charges and other assets, net of amortization
                                                          
                                                          
                                                          4,674
                                                          
                                                          
                                                          
                                                          1,129Total
      Assets
                                                          
                                                          $
                                                          115,252
                                                          
                                                          
                                                          $
                                                          114,640LIABILITIES AND SHAREHOLDERS'
      EQUITYLIABILITIESRecourse
      debt
                                                          
                                                          $
                                                          35,807
                                                          
                                                          
                                                          $
                                                          37,542Other
      liabilities
                                                          
                                                          
                                                          12,048
                                                          
                                                          
                                                          
                                                          13,383Payable
      to U.S. operating real estate segment
                                                          
                                                          
                                                          42,990
                                                          
                                                          
                                                          
                                                          38,305Accrued
      income tax liability-current
                                                          
                                                          
                                                          14,605
                                                          
                                                          
                                                          
                                                          15,803Total
      Liabilities
                                                          
                                                          
                                                          105,450
                                                          
                                                          
                                                          
                                                          105,033Total
      Shareholders' Equity
                                                          
                                                          
                                                          9,802
                                                          
                                                          
                                                          
                                                          9,607Total
      Liabilities and Shareholders' Equity
                                                          
                                                          $
                                                          115,252
                                                          
                                                          
                                                          $
                                                          114,640


-23-
 Table of Contents





Puerto
Rican Land Development operations hold our community development assets in
Puerto Rico, consisting of two planned communities, owned by LDA.  The
first planned community, Parque Escorial, is currently under development and
consists of residential, commercial and recreation land similar to our U.S.
operations but on a smaller scale.  Our second planned community,
Parque El Commandante is currently in the planning stages.  Our
homebuilding operation builds condominiums for sale on land located in its
planned communities.  Each homebuilding project is organized into
separate entities, all wholly owned by IGP and LDA.  LDA also retained
a limited partner interest in two commercial buildings in Parque Escorial opened
in 2001 and 2005 which were built on land contributed by LDA.





For
      the three months endedPuerto Rican Land Development
      Operations:
                                                              
                                                              March 31, 2009
                                                              
                                                              
                                                              March 31, 2008Operating
      revenuesHomebuilding
      – home sales
                                                              
                                                              $
                                                              -
                                                              
                                                              
                                                              $
                                                              2,244Operating
      expensesCost
      of home sales
                                                              
                                                              
                                                              13
                                                              
                                                              
                                                              
                                                              1,717General,
      administrative, selling and marketing
                                                              
                                                              
                                                              98
                                                              
                                                              
                                                              
                                                              95Total
      expenses
                                                              
                                                              
                                                              111
                                                              
                                                              
                                                              
                                                              1,812Operating
      (loss) income
                                                              
                                                              
                                                              (111
                                                              )
                                                              
                                                              
                                                              432Other
      income
                                                              
                                                              
                                                              147
                                                              
                                                              
                                                              
                                                              269Income
      before provision for income taxes
                                                              
                                                              
                                                              36
                                                              
                                                              
                                                              
                                                              701Provision
      for income taxes
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              -Net
      income
                                                              
                                                              $
                                                              36
                                                              
                                                              
                                                              $
                                                              701





As
      of
                                                              
                                                              
                                                              As
      ofPuerto Rican Land Development Balance
      Sheet:
                                                              
                                                              March 31,
                                                                2009
                                                              
                                                              
                                                              December 31,
                                                                2008ASSETSInvestments
      in real estate
                                                              
                                                              $
                                                              21,819
                                                              
                                                              
                                                              $
                                                              20,310Cash
      and cash equivalents
                                                              
                                                              
                                                              62
                                                              
                                                              
                                                              
                                                              61Restricted
      cash and escrow deposits
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              3Investments
      in unconsolidated real estate entities
                                                              
                                                              
                                                              14,451
                                                              
                                                              
                                                              
                                                              14,234Deferred
      charges and other assets, net of amortization
                                                              
                                                              
                                                              56
                                                              
                                                              
                                                              
                                                              63Total
      Assets
                                                              
                                                              $
                                                              36,388
                                                              
                                                              
                                                              $
                                                              34,671LIABILITIES AND SHAREHOLDERS'
      EQUITYLIABILITIESRecourse
      debt
                                                              
                                                              $
                                                              5,207
                                                              
                                                              
                                                              $
                                                              4,327Accounts
      payable and accrued liabilities
                                                              
                                                              
                                                              11,753
                                                              
                                                              
                                                              
                                                              10,967Total
      Liabilities
                                                              
                                                              
                                                              16,960
                                                              
                                                              
                                                              
                                                              15,294Total
      Shareholders' Equity
                                                              
                                                              
                                                              19,428
                                                              
                                                              
                                                              
                                                              19,377Total Liabilities and
      Shareholders' Equity
                                                              
                                                              $
                                                              36,388
                                                              
                                                              
                                                              $
                                                              34,671





Corporate





The
Company’s Corporate segment consists of the general and administrative expenses
necessary to operate as a public company.  These costs have not been
allocated to the apartment rental and land development divisions.





The
following tables reconcile the segment reporting to the financial
statements.


-24-
 Table of Contents


For
the three months ended March 31, 2009:


Revenues
              
              
              Expenses
              
              
              Operating
      Income
              
              
              Other
      Income/
                (Expense)
              
              
              Income
      Before Provision (Benefit) for Income Taxes
              
              
              Provision
      (Benefit) for Income Taxes
              
              
              Income
                (Loss)
      from Continuing Operations
              
              
              Discontinued
                Operations
              
              
              Consolidated
      Net Income (Loss)Operating
      Real EstateU.S.
              
              $
              8,415
              
              
              $
              5,216
              
              
              $
              3,199
              
              
              $
              (2,089
              )
              
              $
              1,110
              
              
              $
              53
              
              
              $
              1,057
              
              
              $
              (596
              )
              
              $
              461P.R.
              
              
              446
              
              
              
              670
              
              
              
              (224
              )
              
              
              (190
              )
              
              
              (414
              )
              
              
              (366
              )
              
              
              (48
              )
              
              
              1,362
              
              
              
              1,314Total
      Operating Real Estate
              
              
              8,861
              
              
              
              5,886
              
              
              
              2,975
              
              
              
              (2,279
              )
              
              
              696
              
              
              
              (313
              )
              
              
              1,009
              
              
              
              766
              
              
              
              1,775Land
      DevelopmentU.S.
              
              
              531
              
              
              
              1,464
              
              
              
              (933
              )
              
              
              (652
              )
              
              
              (1,585
              )
              
              
              (690
              )
              
              
              (895
              )
              
              
              -
              
              
              
              (895
              )P.R.
              
              
              -
              
              
              
              111
              
              
              
              (111
              )
              
              
              147
              
              
              
              36
              
              
              
              -
              
              
              
              36
              
              
              
              -
              
              
              
              36Total
      Land Development
              
              
              531
              
              
              
              1,575
              
              
              
              (1,044
              )
              
              
              (505
              )
              
              
              (1,549
              )
              
              
              (690
              )
              
              
              (859
              )
              
              
              
              
              
              
              (859
              )Corporate
              
              
              -
              
              
              
              897
              
              
              
              (897
              )
              
              
              375
              
              
              
              (522
              )
              
              
              49
              
              
              
              (571
              )
              
              
              -
              
              
              
              (571
              )Intersegment
              
              
              (7
              )
              
              
              (276
              )
              
              
              269
              
              
              
              (226
              )
              
              
              43
              
              
              
              (215
              )
              
              
              258
              
              
              
              -
              
              
              
              258$
              9,385
              
              
              $
              8,082
              
              
              $
              1,303
              
              
              $
              (2,635
              )
              
              $
              (1,332
              )
              
              $
              (1,169
              )
              
              $
              (163
              )
              
              $
              766
              
              
              $
              603





For
the three months ended March 31, 2008:


Revenues
              
              
              Expenses
              
              
              Operating
      Income
              
              
              Other
      Income/
                (Expense)
              
              
              Income
      Before Provision (Benefit) for Income Taxes
              
              
              Provision
      (Benefit) for Income Taxes
              
              
              Income
                (Loss)
      from Continuing Operations
              
              
              Discontinued
                Operations
              
              
              Consolidated
      Net Income (Loss)Operating
      Real EstateU.S.
              
              $
              8,458
              
              
              $
              5,488
              
              
              $
              2,970
              
              
              $
              (1,935
              )
              
              $
              1,035
              
              
              $
              500
              
              
              $
              535
              
              
              $
              (184
              )
              
              $
              351P.R.
              
              
              399
              
              
              
              737
              
              
              
              (338
              )
              
              
              (201
              )
              
              
              (539
              )
              
              
              271
              
              
              
              (810
              )
              
              
              574
              
              
              
              (236
              )Total
      Operating Real Estate
              
              
              8,857
              
              
              
              6,225
              
              
              
              2,632
              
              
              
              (2,136
              )
              
              
              496
              
              
              
              771
              
              
              
              (275
              )
              
              
              390
              
              
              
              115Land
      DevelopmentU.S.
              
              
              1,046
              
              
              
              1,675
              
              
              
              (629
              )
              
              
              (678
              )
              
              
              (1,307
              )
              
              
              (882
              )
              
              
              (425
              )
              
              
              -
              
              
              
              (425
              )P.R.
              
              
              2,244
              
              
              
              1,812
              
              
              
              432
              
              
              
              269
              
              
              
              701
              
              
              
              -
              
              
              
              701
              
              
              
              -
              
              
              
              701Total
      Land Development
              
              
              3,290
              
              
              
              3,487
              
              
              
              (197
              )
              
              
              (409
              )
              
              
              (606
              )
              
              
              (882
              )
              
              
              276
              
              
              
              -
              
              
              
              276Corporate
              
              
              -
              
              
              
              1,223
              
              
              
              (1,223
              )
              
              
              210
              
              
              
              (1,013
              )
              
              
              (201
              )
              
              
              (812
              )
              
              
              -
              
              
              
              (812
              )Intersegment
              
              
              (7
              )
              
              
              (305
              )
              
              
              298
              
              
              
              205
              
              
              
              503
              
              
              
              116
              
              
              
              387
              
              
              
              -
              
              
              
              387$
              12,140
              
              
              $
              10,630
              
              
              $
              1,510
              
              
              $
              (2,130
              )
              
              $
              (620
              )
              
              $
              (196
              )
              
              $
              (424
              )
              
              $
              390
              
              
              $
              (34
              )




-25-
 Table of Contents


As
of March 31, 2009:


Investment
      in Real Estate
                                                            
                                                            
                                                            Total
      Assets
                                                            
                                                            
                                                            Recourse
      Debt
                                                            
                                                            
                                                            Non-recourse
      Debt
                                                            
                                                            
                                                            Total
      LiabilitiesOperating
      Real EstateU.S.
                                                            
                                                            $
                                                            76,502
                                                            
                                                            
                                                            $
                                                            155,264
                                                            
                                                            
                                                            $
                                                            254
                                                            
                                                            
                                                            $
                                                            163,278
                                                            
                                                            
                                                            $
                                                            171,502P.R.
                                                            
                                                            
                                                            9,467
                                                            
                                                            
                                                            
                                                            33,268
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            8,376
                                                            
                                                            
                                                            
                                                            15,867Total
      Operating Real Estate
                                                            
                                                            
                                                            85,969
                                                            
                                                            
                                                            
                                                            188,532
                                                            
                                                            
                                                            
                                                            254
                                                            
                                                            
                                                            
                                                            171,654
                                                            
                                                            
                                                            
                                                            187,369Land
      DevelopmentU.S.
                                                            
                                                            
                                                            84,952
                                                            
                                                            
                                                            
                                                            115,252
                                                            
                                                            
                                                            
                                                            35,807
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            105,450P.R.
                                                            
                                                            
                                                            21,819
                                                            
                                                            
                                                            
                                                            36,388
                                                            
                                                            
                                                            
                                                            5,207
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            16,960Total
      Land Development
                                                            
                                                            
                                                            106,771
                                                            
                                                            
                                                            
                                                            151,640
                                                            
                                                            
                                                            
                                                            41,014
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            122,410Corporate
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            (2,099
                                                            )
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            149Intersegment
                                                            
                                                            
                                                            (1,564
                                                            )
                                                            
                                                            
                                                            (73,840
                                                            )
                                                            
                                                            
                                                            (1,430
                                                            )
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            (63,877
                                                            )Held
      for sale
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            94,097
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            111,925$
                                                            191,176
                                                            
                                                            
                                                            $
                                                            358,330
                                                            
                                                            
                                                            $
                                                            39,838
                                                            
                                                            
                                                            $
                                                            171,654
                                                            
                                                            
                                                            $
                                                            357,976





As
of December 31, 2008:


Investment
      in Real Estate
                                                        
                                                        
                                                        Total
      Assets
                                                        
                                                        
                                                        Recourse
      Debt
                                                        
                                                        
                                                        Non-recourse
      Debt
                                                        
                                                        
                                                        Total
      LiabilitiesOperating
      Real EstateU.S.
                                                        
                                                        $
                                                        75,120
                                                        
                                                        
                                                        $
                                                        149,748
                                                        
                                                        
                                                        $
                                                        257
                                                        
                                                        
                                                        $
                                                        159,822
                                                        
                                                        
                                                        $
                                                        165,621P.R.
                                                        
                                                        
                                                        9,524
                                                        
                                                        
                                                        
                                                        35,623
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        8,399
                                                        
                                                        
                                                        
                                                        15,199Total
      Operating Real Estate
                                                        
                                                        
                                                        84,644
                                                        
                                                        
                                                        
                                                        185,371
                                                        
                                                        
                                                        
                                                        257
                                                        
                                                        
                                                        
                                                        168,221
                                                        
                                                        
                                                        
                                                        180,820Land
      DevelopmentU.S.
                                                        
                                                        
                                                        81,821
                                                        
                                                        
                                                        
                                                        114,640
                                                        
                                                        
                                                        
                                                        37,542
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        105,033P.R.
                                                        
                                                        
                                                        20,310
                                                        
                                                        
                                                        
                                                        34,671
                                                        
                                                        
                                                        
                                                        4,327
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        15,294Total
      Land Development
                                                        
                                                        
                                                        102,131
                                                        
                                                        
                                                        
                                                        149,311
                                                        
                                                        
                                                        
                                                        41,869
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        120,327Corporate
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        12,663
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -Intersegment
                                                        
                                                        
                                                        (1,282
                                                        )
                                                        
                                                        
                                                        (85,780
                                                        )
                                                        
                                                        
                                                        (2,710
                                                        )
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        (59,003
                                                        )Held
      for Sale
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        93,628
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        111,812$
                                                        185,493
                                                        
                                                        
                                                        $
                                                        355,193
                                                        
                                                        
                                                        $
                                                        39,416
                                                        
                                                        
                                                        $
                                                        168,221
                                                        
                                                        
                                                        $
                                                        353,956





(12)
            SUPPLEMENTAL
      CASH FLOW INFORMATION





Interest
and income taxes paid were as follows for the three months ended March 31 (in
thousands):





2009
                  
                  
                  2008Interest
      paid, net of amounts capitalized of $471,000 and $701,000.
                  
                  $
                  4,734
                  
                  
                  $
                  3,747Income
      taxes paid
                  
                  $
                  16
                  
                  
                  $
                  5
 -26-
 Table of Contents


PART
I





ITEM
      2.
            MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
      AND RESULTS OF OPERATION





This Quarterly Report on Form 10-Q contains various “forward-looking
statements.”  Forward-looking statements relate to expectations,
beliefs, projections, future plans and strategies, anticipated events or trends
and similar expressions concerning matters that are not historical
facts.  In some cases, you can identify forward-looking statements by
the use of forward-looking terminology such as “believes,” “expects,” “may,”
“will,” “would,” “could,” “should,” “seeks,” “intends,” “plans,” “projects,”
“estimates” or anticipates” or the negative of these words and phrases or
similar words or phrases.  Statements regarding the following subjects
may be impacted by a number of risks and uncertainties:





·
            our
      business and investment strategy;


·
            our
      projected results of operations;


·
            our
      ability to manage our anticipated
growth;


·
            our
      ability to obtain future financing
arrangements;


·
            our
      estimates relating to, and our ability to pay, future
      distributions;


·
            our
      understanding of our competition and our ability to compete
      effectively;


·
            real
      estate market and industry trends in the United States, and particularly
      in the St. Charles, Maryland marketplace and its surrounding areas, and
      Puerto Rico;


·
            projected
      capital and operating expenditures;


·
            availability
      and creditworthiness of current and prospective
  tenants;


·
            interest
      rates; and


·
            lease
      rates and terms.





The forward-looking statements are
based on our beliefs, assumptions and expectations of our future performance,
taking into account all information currently available to us.  These
beliefs, assumptions and expectations are subject to risks and uncertainties and
can change as a result of many possible events or factors, not all of which are
known to us.  If a change occurs, our business, financial condition,
liquidity and results of operations may vary materially from those expressed in
our forward-looking statements.





The following discussion should be read
in conjunction with the consolidated financial statements and notes thereto
appearing in Item 1of this Quarterly Report on Form 10-Q.





GENERAL





ACPT is a
self managed holding company that is primarily engaged in the business of
investing in and managing multifamily rental properties as well as community
development and homebuilding through its consolidated
subsidiaries.  In the first quarter of 2009, ACPT operated in two
principal lines of business, Operating Real Estate and Land Development, and
conducted its operations in both the United States and Puerto Rico.





U.S.
Operating Real Estate





Our U.S. Operating Real Estate
business is managed through American Rental Properties Trust ("ARPT") and
American Rental Management Company ("ARMC").  ARPT holds the general
and limited partnership interests in our single-purpose entities that own the
U.S. Apartment Properties.  ARPT's ownership in these entities ranges
from 0.1% to 100%.  Our U.S. Operations also include the management of
apartment properties in which we have an ownership interest and one third-party
owned apartment property.    Effective March 1, 2009,
ARMC will no longer manage the third-party owned apartment
property.





Puerto
Rican Operating Real Estate





Our Puerto
Rican Operating Real Estate business is conducted through Interstate General
Properties Limited Partnership S.E. ("IGP").  IGP owns interests in
the Puerto Rico apartment properties and two commercial properties and provides
property management services to the Puerto Rico apartment properties, apartment
properties owned by third parties, our Puerto Rican commercial properties, and
home-owner associations related to our Puerto Rican planned
communities.  IGP also provides management services for our Puerto
Rican homebuilding and community development operations.  The Puerto Rico
apartment properties are organized into separate partnerships and receive HUD
subsidies.  IGP's ownership in these partnerships ranges from 1% to 52.5%.
 IGP's ownership in the commercial properties ranges from 28% to
100%.


-27-
 Table of Contents


U.S.
Land Development




Our U.S. Land
Development operations are managed through American Land Development, Inc.
("ALD").  ALD owns and develops our land holdings in St. Charles,
Maryland, which consists of a 9,000 acre planned community consisting of
residential, commercial, recreational and open space land.  ALD also had a
50% interest in a land development joint venture formed to develop land for an
active adult community in St. Charles, Maryland, until we sold our interest in
the venture in November 2008.  In October 2008, the Company entered
into an agreement with Surrey Homes, LLC (“Surrey Homes”) to contribute
$2,000,000 over the next year in exchange for a 50% ownership interest in Surrey
Homes.




Puerto
Rican Land Development





Our
Puerto Rican Land Development operations are conducted through Land Development
Associates, S.E. (“LDA”).  LDA holds our community development assets
in Puerto Rico, which consists of two planned communities.  The first
planned community, Parque Escorial, is currently under development and consists
of residential, commercial and recreational land similar to our U.S. land
development operations but on a smaller scale.  Our second planned
community, Parque El Commandante, is currently in the planning
stages.  Our homebuilding operation builds condominiums for sale on
land located in its planned communities.  LDA retained a limited
partner interest in two commercial buildings in Parque Escorial opened in 2001
and 2005, which were built on land contributed by LDA.





ACPT is
taxed as a U.S. partnership and its income flows through to its
shareholders.  ACPT is subject to Puerto Rico taxes on IGP Group’s
taxable income, generating foreign tax credits that have been passed through to
ACPT’s shareholders. A Federal tax regulation has been proposed that could
eliminate the ability to pass through these foreign tax credits to ACPT’s
shareholders.  Comments on the proposed regulation are currently being
evaluated with the final regulation effective for tax years beginning after the
final regulation is ultimately published in the Federal
Register.   ACPT’s income consists of (i) certain passive income
from IGP Group, a controlled foreign corporation, (ii) distributions from IGP
Group and (iii) dividends from ACPT’s U.S. subsidiaries.  Other than
Interstate Commercial Properties (“ICP”), which is taxed as a Puerto Rico
corporation, the income from the remaining Puerto Rico operating entities passes
through to IGP Group or ALD.  Of this income, only the portion
attributable to the profits on the residential land sold in Parque Escorial
passes through to ALD.  ALD, ARMC, and ARPT are taxed as U.S.
corporations.  The taxable income from the U.S. apartment properties
flows through to ARPT.





EXECUTIVE
SUMMARY OF FIRST QUARTER 2009 RESULTS





Consolidated
operating revenues are derived primarily from rental revenue, community
development land sales and home sales.





For the
three months ended March 31, 2009, our consolidated rental revenues increased
$93,000, or 1%, to $8,494,000 as compared to $8,401,000 for the three months
ended March 31, 2008.  The increase was primarily attributable to
overall rent increases at comparable properties in both the United States and
Puerto Rico offset by an increase in vacancies. Consolidated net operating
income (“NOI”), defined as rental property revenues less rental property
operating expenses, is the primary performance measure we use to assess the
results of our operations.  We provide NOI as a supplement to net
income calculated in accordance with GAAP. NOI does not represent net income
calculated in accordance with GAAP.  As such, it should not be
considered an alternative to net income as an indication of our operating
performance.  ACPT’s NOI increased $186,000, or 4%, to $4,762,000
during the three months ended March 31, 2009 as compared to $4,576,000 for the
three months ended March 31, 2008.  This represents ACPT’s annual rent
increase of 3% and the impact of our costs saving initiatives implemented in
2008.





Community
development land sales for the three months ended March 31, 2009 decreased
$515,000, or 50%, to $531,000 as compared to $1,046,000 for the three months
ended March 31, 2008.   The Company sold one commercial parcel in
the first quarter of 2009.  Residential land sales, currently sourced
from the U.S. Land Development segment, result in large part from a sales
agreement with Lennar Corporation (“Lennar”).  No lots were sold in
the first quarter of 2009 as compared to 11 lots during the same period of
2008.





There
were no home sales for the three months ended March 31, 2009 as compared to
$2,244,000 for the three months ended March 31, 2008.  The Company
closed 9 units during the first quarter of 2008.


-28-
 Table of Contents


The
Company pools its overhead costs, including accounting, human resources, office
management, technology and executive office costs, and allocates those costs to
its segments based on percentages of management’s allocated
time.  General, administrative, selling and marketing costs
company-wide for the three months ended March 31, 2009, decreased $21,000, or
1%, to $2,337,000 as compared to $2,358,000 for the three months ended March 31,
2008.  The decrease in the first quarter of 2009 was the result of the
reorganization and costs saving initiatives implemented in the fourth quarter of
2008 offset in part by increased legal and accounting costs as well as accruals
for stock based compensation issued to the Chief Executive Officer and
non-employee Trustees.




During the first quarter of
2009, the Company decided to sell the five U.S. apartment properties in
Baltimore, Maryland and is currently working with a broker to complete the five
Baltimore transactions.  In addition, the Company executed a
definitive agreement to sell the Puerto Rico apartment
properties.   In accordance with SFAS No. 144, the carrying value
of the Baltimore and Puerto Rican Properties’ assets have been classified as
“held for sale” on the Company’s consolidated balance sheets at March 31, 2009
and December 31, 2008, and the properties’ results of operations have been
classified as “discontinued operations” for all periods presented in the
consolidated statements of income.  Depreciation is suspended during
the period the property is held for sale.




ACPT
recognized a loss on write-down of fair value less costs to sell of $750,000 in
the first quarter of 2009 related to the Baltimore properties currently
classified as held for sale.  Subsequent to the first quarter but
prior to the issuance of the quarterly report for the period ended March 31,
2009, the Company ceased negotiations with the one buyer who was intent to
purchase multiple properties due to excessive
re-trading.  Accordingly, the broker is now looking to individual
buyers with compressed pricing for the properties that were grouped together as
a disposal group as of December 31, 2008.  As a result, the Company
revised its estimated sales values and determined that an impairment charge was
required to further reduce the carrying values of the Baltimore properties
to their estimated fair market value.
  On a
consolidated basis, the Company reported net loss attributable to ACPT of
$170,000 for the three months ended March 31, 2009.  The net loss included
a total benefit for income taxes of $800,000 of which $1,169,000 tax benefit
related to losses before discontinued operations and $369,000 tax provision was
included in discontinued operations.  As a result, the total consolidated
effective tax rate attributable to ACPT was approximately 83%.  The total
consolidated effective rate was impacted by the change in the deferred tax asset
valuation allowance and accrued taxes and penalties related to uncertain tax
positions.  For further discussion of these items, see “Results of
Operations-Provisions for Income Taxes – Provision for (Benefit from) Income
Taxes” and Note 9 of our Consolidated Financial Statements in Item 1 of this
Quarterly Report on Form 10-Q.




CRITICAL
ACCOUNTING POLICIES





The Securities and Exchange Commission
defines critical accounting policies as those that are most important to the
portrayal of our financial condition and results of operations.  The
preparation of financial statements in conformity with GAAP in the United States
requires management to use judgment in the application of accounting policies,
including making estimates and assumptions.  These judgments affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the dates of the financial statements and the reported
amounts of revenue and expenses during the reporting periods.  If our
judgment or interpretation of the facts and circumstances relating to various
transactions had been different, it is possible that different accounting
policies would have been applied resulting in a different presentation of our
financial statements.  Below is a discussion of accounting policies
which we consider critical in that they may require complex judgment in their
application or require estimates about matters which are inherently
uncertain.





Refer to
the Company’s 2008 Annual Report on Form 10-K for a discussion of critical
accounting policies, which include sales, profit recognition and cost
capitalization, investment in unconsolidated real estate entities, impairment of
long lived assets, depreciation of investments in real estate, income taxes and
contingencies.  For the three months ended March 31, 2009, there were
no material changes to our policies.




RESULTS
OF OPERATIONS





The
following discussion is based on the consolidated financial statements of the
Company.  It compares the components of the results of operations of
the Company by segment for the three months ended March 31, 2009 and 2008
(unaudited).  Historically, the Company’s financial results have been
significantly affected by the cyclical nature of the real estate
industry.  Accordingly, the Company’s historical financial statements
may not be indicative of future results.  This discussion should be read in
conjunction with the accompanying consolidated financial statements and notes
included elsewhere in this report and within our Annual Report on Form
10-K.


-29-
 Table of Contents


OPERATING REAL
ESTATE
  For the three months ended March 31, 2009, our Operating Real Estate line of
business generated $4,762,000 of net operating income compared to $4,576,000 of
net operating income generated by that line of business for the same period in
2008.  Additional information and analysis of the U.S. Operating Real
Estate and Puerto Rican Operating Real Estate operations can be found in the
tables below.
  U.S.
Operating Real Estate Operations
 For
      the three months endedMarch
      31,
                        2009
                      
                      
                      
                      March
      31,
                        2008Operating
      revenues
                      
                      $
                      8,294
                      
                      
                      $
                      8,296Operating
      expenses
                      
                      
                      3,587
                      
                      
                      
                      3,675Net
      operating income
                      
                      
                      4,707
                      
                      
                      
                      4,621Management
      and other fees, substantially all from related entities
                      
                      
                      32
                      
                      
                      
                      38General,
      administrative, selling and marketing
                      
                      
                      (381
                      )
                      
                      
                      (338
                      )Depreciation
                      
                      
                      (1,159
                      )
                      
                      
                      (1,351
                      )Operating
      income
                      
                      
                      3,199
                      
                      
                      
                      2,970Other
      expenses
                      
                      
                      (2,089
                      )
                      
                      
                      (1,935
                      )Income
      before provision for income taxes
                      
                      
                      1,110
                      
                      
                      
                      1,035Provision for
      income taxes
                      
                      
                      53
                      
                      
                      
                      500Income
      from continuing operations
                      
                      
                      1,057
                      
                      
                      
                      535Discontinued
      operations
                      
                      
                      (596
                      )
                      
                      
                      (184
                      )Consolidated
      net income
                      
                      $
                      461
                      
                      
                      $
                      351Depreciation
                      
                      
                      1,159
                      
                      
                      
                      1,623FFO
                      
                      $
                      1,620
                      
                      
                      $
                      1,974
 
 NOI
increased $86,000, or 2%, to $4,707,000 during the three months ended March 31,
2009 as compared to $4,621,000 for the three months ended March 31,
2008.  As described below, the increase in NOI is due to an
overall decrease in rental property operating expenses due to management’s cost
saving initiatives.
  Rental Property Revenues and Operating Expenses
  For
the three months ended March 31, 2009, rental property revenues remained
consistent from the same period in 2008.   For the first quarter of
2009, this was the result of annual rent increases offset by an increase in
vacancies.
  Rental
property operating expenses decreased $88,000, or 2%, for the three months ended
March 31, 2009 to $3,587,000 compared to $3,675,000 for the same period of
2008.  The overall decrease in rental property operating expenses was
primarily the result of management’s cost saving initiatives with significant
decreases in spending on salaries and benefits, repairs and
maintenance, office expenses, and snow removal.
  General, Administrative, Selling and Marketing Expenses
  The
primary component of the general, administrative, selling and marketing expenses
is the corporate overhead allocation.  General, administrative,
selling and marketing expenses increased $43,000, or 13%, to $381,000 during the
three months ended March 31, 2009, as compared to $338,000 for the same period
in 2008.  Overall, general and administrative expenses
decreased.  However, this increase was due to the methodology by which
the Company allocates general and administrative expenses between
segments.  See “Results of Operations – Corporate.”
  Our
unconsolidated and managed-only apartment properties reimburse the Company for
certain corporate overhead costs that are attributable to the operations of
those properties.  In accordance with EITF Topic 01-14, “Income
Statement Characterization of Reimbursements Received for Out of Pocket Expenses
Incurred,” the cost and reimbursement of these costs are not included in
general and administrative expenses, but rather they are reflected as separate
line items on the consolidated income statement.
 -30-
 Table of Contents
 Depreciation





Depreciation
decreased $192,000, or 14%, for the three months ended March 31, 2009 to
$1,159,000 compared to $1,351,000 for the same period of 2008.  A
depreciation catch-up adjustment was recorded in the first quarter of 2008
related to the Sheffield Green apartments.




Interest
Expense





For 2009
and 2008, interest expense primarily consisted of interest incurred on the
non-recourse debt from our investment properties.  Interest expense
decreased $194,000, or 7%, to $2,684,000 for the three months ended March 31,
2009, as compared to $2,878,000 for the same period
in 2008.  The decrease in interest expense resulted from routine
amortization of our loans.





Discontinued
Operations





Discontinued
operations decreased by $412,000 to $(596,000) for the three months ended March
31, 2009 compared to ($184,000) for the same period of
2008.   The increase was primarily the result of
the loss on write-down to fair value less costs to sell of
$750,000 and ceasing the recording of depreciation expense on the Baltimore
properties which are classified as discontinued operations in the first quarter
of 2009.  In 2008, these properties had $273,000 in depreciation
expenses.





Funds
from Operations





Funds
from Operations (“FFO”) is a non-GAAP financial measure that we believe, when
considered with the financial statements prepared in accordance with GAAP, is
helpful to investors in understanding our performance because it captures
features particular to real estate performance by recognizing that real estate
generally appreciates over time or maintains residual value to a much greater
extent than do other depreciable assets such as machinery, computers or other
personal property.  FFO is defined as net income (loss), computed in
accordance with GAAP, excluding gains (or losses) from sales of depreciable
property, plus depreciation and amortization, and after adjustments for
unconsolidated partnerships and joint ventures.




FFO
decreased $354,000, or 18%, to $1,620,000 for the three months ended March
31, 2009 compared to $1,974,000 for the same period in 2008.  The decrease
was driven by the impact of the loss on write-down to fair value less costs to
sell, a decrease in rental property operating expense, and a decrease in the
income tax provision, related to the deferred tax valuation
adjustment.


Puerto
Rican Operating Real Estate Operations


For
      the three months endedMarch
      31,
                                                                  2009
                                                                
                                                                
                                                                March
      31,
                                                                  2008Operating
      revenues
                                                                
                                                                $
                                                                200
                                                                
                                                                
                                                                $
                                                                105Operating
      expenses
                                                                
                                                                
                                                                151
                                                                
                                                                
                                                                
                                                                156Net
      operating income (loss)
                                                                
                                                                
                                                                49
                                                                
                                                                
                                                                
                                                                (51
                                                                )Management
      and other fees, substantially all from related entities
                                                                
                                                                
                                                                38
                                                                
                                                                
                                                                
                                                                37General,
      administrative, selling and marketing
                                                                
                                                                
                                                                (254
                                                                )
                                                                
                                                                
                                                                (267
                                                                )Depreciation
                                                                
                                                                
                                                                (57
                                                                )
                                                                
                                                                
                                                                (57
                                                                )Operating
      loss
                                                                
                                                                
                                                                (224
                                                                )
                                                                
                                                                
                                                                (338
                                                                )Other
      expense
                                                                
                                                                
                                                                (190
                                                                )
                                                                
                                                                
                                                                (201
                                                                )Loss
      before provision for income taxes
                                                                
                                                                
                                                                (414
                                                                )
                                                                
                                                                
                                                                (539
                                                                )(Benefit)
      provision for income taxes
                                                                
                                                                
                                                                (366
                                                                )
                                                                
                                                                
                                                                271Loss
      from continuing operations
                                                                
                                                                
                                                                (48
                                                                )
                                                                
                                                                
                                                                (810
                                                                )Discontinued
      operations
                                                                
                                                                
                                                                1,362
                                                                
                                                                
                                                                
                                                                574Consolidated
      net income (loss)
                                                                
                                                                $
                                                                1,314
                                                                
                                                                
                                                                $
                                                                (236
                                                                )Depreciation
                                                                
                                                                
                                                                83
                                                                
                                                                
                                                                
                                                                934FFO
                                                                
                                                                $
                                                                1,397
                                                                
                                                                
                                                                $
                                                                698
 -31-
 Table of
Contents


Net
Operating Income





NOI
increased $100,000, or 196%, to $49,000 during the three months ended March 31,
2009 as compared to ($51,000) for the three months ended March 31,
2008.  With the Puerto Rican apartment properties classified as held
for sale in the first quarter of 2009, the Puerto Rican Operating Real Estate
Operations consists of the Puerto Rico commercial rental property in the
community of Parque Escorial, known as Escorial Building
One.   The Company has leased approximately 76% of the
building.  The increase in the NOI is the result of an increase in
leasing of this building.




Rental
Property Revenues and Operating Expenses





Rental
property revenues increased $95,000, or 90%, to $200,000 for the three months
ended March 31, 2009 compared to $105,000 for the same period of
2008.  The increase in our rental property revenues was the result of
an increase in leasing of Escorial Building One.





Rental
property operating expenses decreased $5,000, or 3%, to $151,000 for the three
months ended March 31, 2009 compared to $156,000 for the same period of
2008.  The slight decrease in operating expenses was a result of
management’s cost savings initiatives implemented in 2008.





General,
Administrative, Selling and Marketing Expenses





The
primary component of general, administrative, selling and marketing expenses is
the corporate overhead allocation.  General, administrative, selling
and marketing expenses decreased $13,000, or 5%, to $254,000 during the three
months ended March 31, 2009, as compared to $267,000 for the same period in
2008.  The decrease was primarily due to a decrease in overall corporate
overhead expenses while the corporate allocation percentage remained
consistent.  See “Results in Operations – Corporate.”





The
apartment properties reimburse IGP for certain costs, including accounting,
human resources, office management and technology, incurred at IGP’s office that
are attributable to the operations of those properties.  In accordance
with EITF 01-14, the costs and reimbursement of these costs are not considered
general, administrative, selling, and marketing expenses but rather, are
reflected as separate line items on the consolidated income
statement.  Due to the fact that we moved our corporate office to our
new office building, Escorial Office Building One, in 2007, rent expense and
parking expenses are eliminated in consolidation.





Interest
Expense





For the
three months ended March 31, 2009, interest expense decreased $47,000, or 17%,
to $227,000 as compared to $274,000 for the same period in 2008.  The
decrease in interest expense resulted from routine amortization of our
loans.





Discontinued
Operations





Discontinued
operations increased $788,000, or 137%, to $1,362,000 for the three months ended
March 31, 2009 compared to $574,000 for the same period in 2008.  The
increase was primarily driven by ceasing the recording of depreciation expense
on the Puerto Rican apartment properties which are classified as discontinued
operations in the first quarter of 2009.  In 2008, these properties
had $841,000 in depreciation expenses.  In addition, general and
administrative expenses related to discontinued operations decreased by $252,000
or 49%, and rental property operating expenses decreased by $81,000, or 3%,
during the first quarter of 2009 as compared to the first quarter 2008. 
Offsetting these decreases was a shift in the provision for income
taxes.




Funds
from Operations





FFO
increased $699,000, or 100%, to $1,397,000 for the three months ended March 31,
2009 compared to $698,000 for the same period in 2008.  The increase was
driven by the fluctuations in the provision for income
taxes.    Refer to Note 9 of our Consolidated Financial
Statements in Item 1 of this Quarterly Report on Form 10-Q.


-32-
 Table of Contents




LAND
DEVELOPMENT





For the
three months ended March 31, 2009, our Land Development line of business
generated $1,044,000 of operating losses compared to $197,000 of operating
losses generated by the line of business for the same period in
2008.  This line of business includes both land and home sales for our
U.S. and Puerto Rican operations. Additional information and analysis of the U.S
and Puerto Rican Land Development operations can be found below.





U.S.
Land Development Operations


For
      the three months endedMarch
      31,
                                                      2009
                                                    
                                                    
                                                    March
      31,
                                                      2009Operating
      revenuesCommunity
      development - land sales
                                                    
                                                    $
                                                    531
                                                    
                                                    
                                                    $
                                                    1,046Operating
      expensesCost
      of land sales
                                                    
                                                    
                                                    446
                                                    
                                                    
                                                    
                                                    903General,
      administrative, selling and marketing
                                                    
                                                    
                                                    1,017
                                                    
                                                    
                                                    
                                                    771Depreciation
                                                    
                                                    
                                                    1
                                                    
                                                    
                                                    
                                                    1Total
      expenses
                                                    
                                                    
                                                    1,464
                                                    
                                                    
                                                    
                                                    1,675Operating
      losses
                                                    
                                                    
                                                    (933
                                                    )
                                                    
                                                    
                                                    (629
                                                    )Other
      expenses
                                                    
                                                    
                                                    (652
                                                    )
                                                    
                                                    
                                                    (678
                                                    )Loss
      before benefit for income taxes
                                                    
                                                    
                                                    (1,585
                                                    )
                                                    
                                                    
                                                    (1,307
                                                    )Benefit
      for income taxes
                                                    
                                                    
                                                    (690
                                                    )
                                                    
                                                    
                                                    (882
                                                    )Net
      loss
                                                    
                                                    $
                                                    (895
                                                    )
                                                    
                                                    $
                                                    (425
                                                    )





Community
Development Land Sales Revenue





Land
sales revenue in any one period is affected by the mix of lot sizes and, to a
greater extent, the mix between residential and commercial
sales.  Community development land sales revenue decreased $515,000,
or 49%, to $531,000 for the three months ended March 31, 2009 compared to
$1,046,000 for the three months ended March 31, 2008.  The decrease is
primarily the result of no residential lots being delivered to Lennar, offset by
an increase in the commercial land sales.  The Company sold
1.85 commercial acres in 2009 compared to 0.99 commercial acres in
2008.





Residential
Land Sales





For the
three months ended March 31, 2009, no lots were delivered to
Lennar.  During the three months ended March 31, 2008, we delivered
three single-family lots and eight town home lots to Lennar, resulting in the
recognition of revenues of $78,000 per single family lot and $68,000 per town
home lot plus $2,600 per lot of water and sewer fees, road fees and other
off-site fees.  The total revenue recognized at initial settlement was
$807,000 for the three months ended March 31, 2008.





During
the three months ended March 31, 2009, we also recognized $26,000 of additional
revenue for lots that were previously sold to Lennar.  This additional
revenue was based on the final settlement price of the homes as provided by our
agreement with Lennar.





Commercial
Land Sales





For the
three months ended March 31, 2009, we sold 1.85 commercial acres in St. Charles,
Maryland for $450,000 compared to 0.99 commercial acres of land in St. Charles,
Maryland for $184,000 for the three months ended March 31, 2008.  The
sale in 2009 was within the Town Center North
development.




Gross
      Margin on Land Sales





The gross
margin on land sales was 16% for the three months ended March 31, 2009 as
compared to 14% for the three months ended March 31, 2008.  Our gross
margins on land sales in the U.S. can fluctuate based on changes in the mix of
residential and commercial land sales. The commercial margins for 2009 and 2008
were impacted by increases in the costs of constructing the boardwalk on the
restaurant park in St. Charles, Maryland, as the actual bid proposals received
in 2007 were higher than the engineer’s expected cost.


-33-
 Table of Contents


General,
Administrative, Selling and Marketing





The
primary component of general, administrative, selling and marketing expenses is
the corporate overhead allocation.  General, administrative, selling
and marketing expenses increased $246,000, or 32%, to $1,017,000 during
the three months ended March 31, 2009 as compared to $771,000 for the same
period of 2008.  Overall, general and administrative expenses
decreased.  However, this increase was due to the methodology by which
the Company allocates general and administrative expenses between
segments.  See “Results of Operations – Corporate.”





Puerto
Rican Land Development Operations


For
      the three months endedMarch
      31,
                                                                                              2009
                                                                                            
                                                                                            
                                                                                            March
      31,
                                                                                              2008Operating
      revenuesHomebuilding
      – home sales
                                                                                            
                                                                                            $
                                                                                            -
                                                                                            
                                                                                            
                                                                                            $
                                                                                            2,244Operating
      expensesCost
      of home sales
                                                                                            
                                                                                            
                                                                                            13
                                                                                            
                                                                                            
                                                                                            
                                                                                            1,717General,
      administrative, selling and marketing
                                                                                            
                                                                                            
                                                                                            98
                                                                                            
                                                                                            
                                                                                            
                                                                                            95Total
      expenses
                                                                                            
                                                                                            
                                                                                            111
                                                                                            
                                                                                            
                                                                                            
                                                                                            1,812Operating
      (loss) income
                                                                                            
                                                                                            
                                                                                            (111
                                                                                            )
                                                                                            
                                                                                            
                                                                                            432Other
      income
                                                                                            
                                                                                            
                                                                                            147
                                                                                            
                                                                                            
                                                                                            
                                                                                            269Income
      before provision for income taxes
                                                                                            
                                                                                            
                                                                                            36
                                                                                            
                                                                                            
                                                                                            
                                                                                            701Provision
      for income taxes
                                                                                            
                                                                                            
                                                                                            -
                                                                                            
                                                                                            
                                                                                            
                                                                                            -Net
      income
                                                                                            
                                                                                            $
                                                                                            36
                                                                                            
                                                                                            
                                                                                            $
                                                                                            701





Community
Development Land Sales





There
were no community development land sales during the three months ended March 31,
2009 and 2008.





Homebuilding





For the
three months ended March 31, 2009, homebuilding revenues decreased $2,244,000,
or 100%, as there were no condominium sales in the first quarter of
2009.  Within the Torres del Escorial, Inc. project, nine units were
sold during 2008 at an average selling price of approximately
$249,000.  As of March 31, 2009, six units within the Torres del
Escorial, Inc. project remain available for sale.





General,
Administrative, Selling and Marketing Expenses





The
primary component of the general, administrative, selling and marketing expenses
is the corporate overhead allocation.  There was no change in general,
administrative, selling and marketing expenses for the three months ended March
31, 2009 as compared to the same period in 2008.    See
“Results of Operations – Corporate.”





Interest
Expense





For the
three months ended March 31, 2009, interest expense decreased $30,000, or 55%,
to $25,000 as compared to $55,000 for the same period in 2008.  The
decrease in interest expense is attributable to a decrease in deferred financing
costs.





CORPORATE
- Results of Operations:





The
Company pools its overhead costs, including accounting, human
resources, office management and technology as well as corporate and other
executive office costs, by geographical location as it is more effective for
allocating to the Company’s lines of business.  Corporate costs are
allocated to the operating segments quarterly based on a percentage of
management’s estimated usage of time.  The amount of general and
administrative expenses allocated to the Corporate Segment decreased by
$299,000, or 34%, for the first quarter 2009 as compared to the same period of
2008.  The decrease was driven by efforts to cut general and
administrative expenses as well as certain fluctuations in the amount of costs
allocated to the operating segments.  The allocation percentages
fluctuate based on the resources and oversight required to operate that
segment.


-34-
 Table of Contents


Total
general, administrative, selling and marketing costs decreased $21,000, or 1%,
to $2,337,000 for the three months ended March 31, 2009 as compared to
$2,358,000 for the same period in 2008.  In the U.S., these costs
remained consistent at approximately $2,203,000 in both quarters and in Puerto
Rico, these costs decreased $21,000, or 14%, to $134,000 in 2009 from $155,000
in 2008.





In the
U.S., the Company noted decreases in salaries and benefits as a result of the
reorganization in the fourth quarter of 2008 as well as decreases in vehicle
expenses, donations, and dues and subscriptions as a result of management’s cost
saving initiatives.  However, these decreases were offset by noted
increases in audit, accounting, and legal fees related to year-end audit
overruns and the sales of the Baltimore and Puerto Rico Apartment properties as
well as increases in accruals for stock based compensation issued to the Chief
Executive Officer and non-employee Trustees.  From the first quarter
of 2008 to the first quarter of 2009, there was also a slight shift in the
allocation of corporate expenses increasing the Land Development segment’s
allocation by 4% while decreasing the Operating Real Estate segment by the
same.  This shift is primarily related to the method by which the
Company allocates overhead.





The 14%
decrease in the Puerto Rican overhead is primarily attributable to a decrease in
salaries and benefits as a result of the reorganization in the fourth quarter of
2008.




INCOME
TAXES





Provision
for (Benefit from) Income Taxes





United
States





The
effective tax rates for the three months ended March 31, 2009 and 2008 were 50%
and 22%, respectively.  The statutory rate is 40%.  The difference in
the statutory tax rate and the effective tax rate for the pre-tax loss during
the three months ended March 31, 2009 was primarily due to accrued taxes and
penalties on uncertain tax positions and the change in the deferred tax asset
valuation allowance.  The difference in the statutory tax rate and the
effective tax rate for the pre-tax loss during the three months ended March 31,
2008 was primarily due to  a relatively small net loss reported, the
related benefit for which, was partially offset by accrued taxes and penalties
on uncertain tax position





Puerto
Rico





The
effective tax rates for the three months ended March 31, 2009 and 2008 were 24%,
and 33%, respectively.  The statutory rate is 29%.   The
difference in the statutory tax rate and the effective tax rate for the pre-tax
income during the three months ended March 31, 2009, was primarily due to tax
exempt income and the change in the deferred tax asset valuation allowance
offset in part by deferred items for which no current benefit may be recognized
and as a result of the pending sale, a basis adjustment to company’s investment
in the Puerto Rico apartment properties.  The difference in the statutory
tax rate and the effective tax rate for the pre-tax loss during the three months
ended March 31, 2008, was primarily due to tax exempt income offset in part by
the double taxation on the earnings of our wholly owned corporate subsidiary,
ICP, and deferred items for which no current benefit may be
recognized.





LIQUIDITY
AND CAPITAL RESOURCES





Summary
of Cash Flows





As of
March 31, 2009, the Company had cash and cash equivalents of $19,595,000 and
$10,869,000 in restricted cash.  Included in the Company’s cash and
cash equivalents is $10,962,000 of cash located within multifamily apartment
entities, and over which the Company does not have direct
control.  ACPT receives surplus cash distributions as well as
management fees from these entities.  As of March 31, 2009, the
Company had corporate available funds of $8,633,000.  The following
table sets forth the changes in the Company’s cash flows ($ in
thousands):





Three
      Months Ended March 31,2009
                                            
                                            
                                            2008Operating
      Activities
                                            
                                            $
                                            1,063
                                            
                                            
                                            $
                                            (2,919
                                            )Investing
      Activities
                                            
                                            
                                            (5,594
                                            )
                                            
                                            
                                            (1,122
                                            )Financing
      Activities
                                            
                                            
                                            91
                                            
                                            
                                            
                                            1,338Net
      Decrease in Cash
                                            
                                            $
                                            (4,440
                                            )
                                            
                                            $
                                            (2,703
                                            )
 -35-
 Table of Contents





For the three months ended March 31, 2009, operating activities provided
$1,063,000 of cash flows compared to $2,919,000 of cash flows used in operating
activities for the three months ended March 31, 2008.  The $3,982,000
increase in cash flows provided by operating activities primarily
resulted from a reduction of $2,131,000 in additions to our community
development assets.  From period to period, cash flow from operating
activities is also impacted by changes in our net income, as discussed more
fully under "Results of Operations," as well as other changes in our receivables
and payables.




Investing Activities


For the
three months ended March 31, 2009, net cash used in investing activities was
$5,594,000 compared to $1,122,000 for the same period of 2008.  Cash
provided by or used in investing activities generally relates to increases in
our investment portfolio through acquisition, development or construction of
rental properties and land held for future use, net of returns on our
investments.  The $4,472,000 increase in the cash used in investing
activities between periods was primarily the result of the investment in the
construction of Gleneagles Apartments and the quarterly investment of $500,000
in Surrey Homes.  In addition, restricted cash increased by $928,000
related to escrow deposits recorded as part of the HUD construction agreement
for Gleneagles Apartments and cash used related to changes in other assets
increased $1,498,000 primarily related to other assets and prepayments related
to the Gleneagles construction project.




Financing
Activities




For the
three months ended March 31, 2009, net cash provided by financing activities was
$91,000 as compared to $1,338,000 for the three months ended March 31,
2008.  This decrease in cash provided by financing activities was
primarily the result of the net differences in the timing of and increases in
mortgage amounts for properties refinanced, differences in county bond proceeds,
dividends to shareholders and debt curtailment from sales between the three
months ended March 31, 2009 and 2008.  The increase in cash proceeds
from debt refinancing relates to the construction of Gleneagles while the
increase in debt payments relates to the payments against the line of
credit.





Liquidity
Requirements





Our
short-term and long-term liquidity requirements consist primarily of obligations
under capital and operating leases, normal recurring operating expenses, regular
debt service requirements, investments in community development and certain
non-recurring expenditures.  The Company has historically met its
short-term and long-term liquidity requirements from cash flow generated from
residential and commercial land sales, home sales, property management fees,
rental property revenue, and financings.  However, with the current
economic environment, there are no assurances that future sales will occur or
that the Company will have adequate access to credit.





Pursuant
to agreements with the Charles County Commissioners, the Company is committed to
completing $12,618,000 of infrastructure projects, all of which are eligible to
be funded by County bond proceeds, either through existing bond receivables or
future issuances.  The Company expects to incur $2,622,000 of this
development over the next 12 months.  Further, as the Company nears
completion of several significant Charles County Roads Projects, $2,528,000 of
retention and open payables as of March 31, 2009 will be required to be funded,
of which $1,351,000 is eligible for bond funding.   These project
costs and the difference between the cost of County projects and any bond
proceeds available to fund related expenditures will be funded out of the
Company’s available cash flows.





On July 22, 2008, the Company signed a
construction contract for $5,960,000 for site development related to the
infrastructure of Hilltop Phase I for the future construction of 220 condominium
units in Parque Escorial.  This work is currently in process and as of
March 31, 2009, Puerto Rico planning and development activities had a remaining
commitment of $2,487,000, all of which is expected to be incurred over the next
nine months.  Our $10,000,000 credit facility, which matures on August
31, 2009, will be used to fund these expenditures.





In
addition to the activity noted above, we may seek additional development loans
and permanent mortgages for continued development and expansion of other parts
of St. Charles and Parque Escorial, potential opportunities in Florida and other
potential rental property opportunities.





There has
been a current reduction in the demand for residential real estate in the St.
Charles and Parque Escorial markets.  Should this reduced demand
result in a significant decline in the prices of real estate in the St. Charles
and Parque Escorial markets or defaults on our sales contracts, it could
adversely impact our cash flows.  With the third amendment of the
agreement with Lennar reducing Lennar’s contractual obligation to take 100 lots
per year, the market may not be sufficient to absorb this sales
pace.  While the Company has negotiated agreements with other national
and local homebuilders, there is no guarantee that lot sales from these
agreements will be absorbed by the market.  Management has also noted
a current reduction in the demand for commercial
properties.  Sustained reductions in demand for our commercial
property would adversely impact our cash flows.


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 Table of Contents


As a
result of our existing commitments and the downturn in the residential real
estate market, management expects to use its resources conservatively in
2009.  Anticipated cash flow from operations, existing loans,
refinanced or extended loans, asset sales, and new financing are expected to
meet our financial commitments for the next 12 months.  However, there
are no assurances that these funds will be generated.  The Company will evaluate and determine on a continuing basis, depending
upon market conditions and the outcome of events described under the section
titled "Special Note Regarding Forward-Looking Statements," the most efficient
use of the Company's capital, including acquisitions and dispositions,
purchasing, refinancing, exchanging or retiring certain of the Company's
outstanding debt obligations, distributions to shareholders and its existing
contractual obligations.
  Recourse Debt - U.S. Land Development
Operations
  Pursuant to
an agreement reached between ACPT and the County in 2002, the Company agreed to
accelerate the construction of two major roadway links to the road
system.  As part of the agreement, the County agreed to issue general
obligation public improvement Bonds (“the Bonds”) to finance $20,000,000 of this
construction guaranteed by letters of credit provided by Lennar as part of a
residential lot sales contract for 1,950 lots in Fairway Village.  The
Bonds were issued in three installments with the final $6,000,000 installment
issued in March 2006.  The Bonds bear interest rates ranging from 4% to 8%,
for a blended lifetime rate for total Bonds issued to date of 5.1%, and call for
semi-annual interest payments and annual principal payments and mature in
fifteen years.  Under the terms of bond repayment agreements between
the Company and the County, the Company is obligated to pay interest and
principal on the full amount of the Bonds.  Therefore, the Company
recorded the full amount of the debt and a receivable from the County
representing the undisbursed Bond proceeds to be advanced to the Company as
major infrastructure development within the project occurs.  As of
December 31, 2008, all of the bond proceeds have been used to fund the specified
development.  As part of the agreement, the Company will pay the
County a monthly payment equal to one-sixth of the semi-annual interest payments
and one-twelfth of the annual principal payment due on the Bonds.  The
County also requires ACPT to fund an escrow account from lot sales that will be
used to repay this obligation.
  In August
2005, the Company signed a Memorandum of Understanding (“MOU”) with the Charles
County Commissioners regarding a land donation that is now the site of a minor
league baseball stadium and will house a planned entertainment
complex.  Under the terms of the MOU, the Company donated 42 acres of
land in St. Charles to the County on December 31, 2005.  The Company
also agreed to expedite off-site utilities, storm-water management and road
construction improvements that will serve the entertainment complex and future
portions of St. Charles so that the improvements will be completed concurrently
with the entertainment complex.  The County will be responsible for
infrastructure improvements on the site of the complex.  In return,
the County agreed to issue additional general obligation bonds to finance the
infrastructure improvements.  In March 2006, $4,000,000 of bonds were
issued for this project, with an additional $3,000,000 issued in both March 2007
and March 2008 and $2,000,000 in March 2009.  These bonds bear
interest rates ranging from 4.9% to 8%, for a blended rate of 5.3%, call for
semi-annual interest payments and annual principal payments, and mature in 15
years.  The terms of the bond repayment agreement are similar to those
noted above.  As of March 31, 2009, $3,776,000 of these bond proceeds
were recorded as a receivable and available to fund the related
infrastructure.  In addition, the County agreed to issue an additional
100 school allocations a year to St. Charles commencing with the issuance of
bonds.
  In
December 2006, the Company reached an agreement with the County whereby the
Company receives interest payments on any undistributed bond proceeds held in
escrow by the County.  The agreement covers the period from July 1,
2005, through the last draw made by the Company.  For the three months
ended March 31, 2009 and 2008, the Company recognized $11,000 and $32,000 of
interest income on these escrowed funds, respectively.
  On April
14, 2006, the Company closed a three-year $14,000,000 revolving line of credit
loan (“the Revolver”) secured by a first lien deed of trust on property located
in St. Charles, Maryland.  During the first quarter of 2009, the Company
renegotiated the terms of the agreement.  The Revolver bears interest
at Prime plus 1.25% (4.25% at March 31, 2009) and was set to mature on April 14,
2009 but has been extended to March 31, 2010.  As of March 31, 2009,
$4,371,000 was outstanding on the this facility which is scheduled to be repaid
quarterly as follows:  second quarter payment of $1,300,000 on June
30, 2009; third quarter payment of $300,000 on September 30, 2009; fourth
quarter payment of $2,200,000 on December 31, 2009; and the remaining balance of
approximately $571,000 in the first quarter of 2010.  Under the terms
of this Revolver, the Company is required to comply with certain financial
covenants, including a minimum net worth covenant.  As of March 31,
2009, the Company failed to meet the minimum net worth covenant at the ACPT
level as tangible net worth was $354,000.  The Company received a
waiver of this covenant for the period through March 31, 2010.  The failure
to meet this covenant did not impact any other debt agreements.
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 Table of Contents
 On April
2, 2008, the Company secured a two-year, $3,600,000 construction loan for the
construction of a commercial restaurant/office building within the O’Donnell
Lake Restaurant Park.  The facility is secured by the land along with
any improvements constructed and bears interest at the Prime Rate (3.25% at
March 31, 2009).  At the end of the two-year construction period, the
Company may convert the loan to a 5-year permanent loan, amortized over a
30-year period at a fixed interest rate to be determined.  As of March
31, 2009, $3,249,000 was outstanding under this facility leaving $351,000
available to fund completion of the building.  As of March 31, 2009,
the building was substantially complete.
  Recourse Debt - Puerto
RicanLand DevelopmentOperations
  Substantially
all of the Company's 490 acres of community development land assets in Parque El
Comandante within the Puerto Rico segment are encumbered by a $10,000,000 recourse
revolving line of credit facility.  The homebuilding and land assets
in Parque Escorial are not encumbered by this facility and remain unencumbered
as of March 31, 2009.  The line of credit bears interest at a
fluctuating rate equivalent to the LIBOR Rate plus 225 basis points (3.51% at
March 31, 2009) and matures on August 31, 2009.  The facility is
currently being used to fund the development of infrastructure in Parque
Escorial, specifically the development of our Hilltop project, as well as Parque
El Comandante.  The outstanding balance of this facility on March 31,
2009 was $5,207,000.  As of August 31, 2009, the Company anticipates
that the balance outstanding on this facility will be approximately
$8,300,000.   While the Company will seek to finance the line
into a construction loan for the development of residential condominiums or
extend the term of the facility, the current state of the credit market may
prevent these plans from occurring.  IGP provided a guarantee on this
credit facility; however, the lender’s recourse under this guarantee is limited
to the collateral, except in the case of fraud, intentional misrepresentation,
or misappropriation of income associated with the collateral. In the event of
default, the lender’s sole recourse is to foreclose on the
property.
  Non-Recourse Debt - U.S.Operating Real
EstateOperations
  As more
fully described in Note 5 to our Consolidated Financial Statements included in
this Quarterly Report on Form 10-Q, the non-recourse apartment properties' debt
is collateralized by apartment projects.  As of March 31, 2009,
approximately 38% of this debt is secured by the Federal Housing Administration
("FHA").  Material changes during 2008 to the non-recourse debt
consists of newly acquired debt and the refinancing of existing
debt.  There were no significant changes to our non-recourse debt
obligations for our U.S. Operating Real Estate Operations during the three
months ended March 31, 2009.
  Non-Recourse
Debt - Puerto RicanOperating Real Estate
Operations
  As more
fully described in Note 5 to our Consolidated Financial Statements included in
this Form 10-Q, the non-recourse debt is collateralized by the respective
multifamily apartment project or commercial building.  As of March 31,
2009, approximately 1% of this debt is secured by the FHA.
  On May
12, 2008, IGP agreed to provide a fixed charge and debt service guarantee
related to the Escorial Office Building I, Inc. (“EOB”) mortgage.  The
fixed charge and debt service guarantee requires IGP to contribute capital in
cash in such amounts required to cause EOB to comply with the related financial
covenants.  The guarantee will remain in full force until EOB has
complied with the financial covenants for four consecutive
quarters.  The Company does not expect the funding of this guarantee
to have a material impact on its liquidity and cash
flows.
  Also in
Puerto Rico, the Company had a mortgage balance which was set to mature on April
30, 2009 but has been extended to May 31, 2009 as the Company completes the
renewal of the related property’s Housing Assistance Program
contract.  As of March 31, 2009, the balance due was
$6,739,500.  Should the Company be unable to negotiate or refinance
with acceptable terms, the sole collateral for this mortgage is the Monserrate
Associates apartment property, which has a cost basis of $3,462,000 at March 31,
2009.  This property generated approximately $2,700,000 of revenue and
$400,000 of pre-tax income in 2008.
  There
were no other significant changes to our non-recourse debt obligations for our
Puerto Rican Operating Real Estate Operations during the three months ended
March 31, 2009.
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Table of Contents


Purchase Obligations and
Other Contractual Obligations





In
addition to our contractual obligations described above, we have other purchase
obligations consisting primarily of contractual commitments for normal operating
expenses at our apartment properties, recurring corporate expenditures including
employment, consulting and compensation agreements and audit fees, non-recurring
corporate expenditures such as improvements at our investment properties, the
construction of the new apartment projects in St. Charles, Maryland, costs
associated with our land development contracts for the County’s road projects
and the development of our land in U.S. and Puerto Rico.  Our U.S. and
Puerto Rico land development and construction contracts are subject to increases
in cost of materials and labor and other project overruns.  Our
overall capital requirements will depend upon acquisition opportunities, the
level of improvements on existing properties and the cost of future phases of
residential and commercial land development.  In the first quarter of
2009, the Company continued its development activity within the master planned
communities in St. Charles and Puerto Rico.





As of
March 31, 2009, as required by the provisions of FIN 48, the Company has
$15,465,000 recorded as FIN 48 accrued income tax liabilities and $4,553,000 as
accrued interest on unpaid income tax liabilities related to uncertain tax
positions.  We are unable to reasonably estimate the ultimate amount
or timing of settlement of these liabilities.





In
October 2008, the Company entered into an agreement with Surrey Homes to
contribute $2,000,000 over the next year in exchange for a 50% ownership
interest in Surrey Homes.  As of March 31, 2009, the Company is
committed to contributing $1,000,000 during the second and third quarters of
2009.





ITEM
      4(T).
            CONTROLS AND
  PROCEDURES




Evaluation
of Disclosure Controls and Procedures





In
connection with the preparation of this Form 10-Q, as of March 31, 2009, an
evaluation was performed under the supervision and with the participation of the
Company's management, including the Chief Executive Officer (“CEO”) and Chief
Financial Officer (“CFO”), of the effectiveness of the design and operation of
our disclosure controls and procedures as defined in Rule 13a-15(e) under the
Exchange Act.  In performing this evaluation, management reviewed the
selection, application and monitoring of our historical accounting
policies.  Based on that evaluation, the CEO and CFO concluded that, as of
March 31, 2009, these disclosure controls and procedures were effective and
designed to ensure that the information required to be disclosed in our reports
filed with the Securities Exchange Commission is recorded, processed, summarized
and reported on a timely basis.





Changes
in Internal Control Over Financial Reporting





The
Company’s management, with the participation of the Company’s CEO and CFO,
evaluated any change in the Company’s internal control over financial reporting
that occurred during the quarter covered by this report and determined that
there was no change in the Company’s internal control over financial reporting
during the quarter covered by this report that has materially affected, or is
reasonably likely to materially affect, the Company’s internal control over
financial reporting.


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 Table of Contents





PART
      II
              OTHER
      INFORMATION





ITEM
      1.
            LEGAL
PROCEEDINGS





See the
information under the heading "Legal Matters" in Note 7 to the consolidated
financial statements in this Form 10-Q for information regarding legal
proceedings, which information is incorporated by reference in this Item
1.





ITEM
      1A.
            RISK FACTORS





There has been no material change in
the Company’s risk factors from those outlined in the Company’s Annual Report on
Form 10-K for the year ended December 31, 2008.








ITEM
      2.
            UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
      PROCEEDS





None.





ITEM
      3.
            DEFAULTS UPON SENIOR
  SECURITIES





None.





ITEM
      4.
            SUBMISSION OF MATTERS TO A VOTE OF SECURITY
      HOLDERS





None.





ITEM
      5.
            OTHER
  INFORMATION





None.





ITEM
      6.
            EXHIBITS





(A)
                Exhibits10.1
                Amended and Restated Employment Agreement,
      dated May 14, 2009, between the Company and Stephen K.
      Griessel31.1
                Rule 13a-14(a)/15d-14(a) Certification Chief Executive
      Officer31.2
                Rule 13a-14(a)/15d-14(a) Certification of Chief
      Financial Officer32.1
                Section 1350 Certification of Chief Executive
      Officer32.2
                Section 1350 Certification of Chief Financial
      Officer




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 Table of Contents


SIGNATURES








Pursuant
to the requirements of the Securities and Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.





AMERICAN COMMUNITY PROPERTIES
      TRUST(Registrant)Dated:  May
      21, 2009
                    By:
                    /s/
      Stephen GriesselStephen
      Griessel
                      Chief
      Executive OfficerDated:  May
      21, 2009
                    By:
                    /s/
      Matthew M. MartinMatthew
      M. Martin
                      Chief
      Financial
Officer


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